In the short-run, an increase in the price of raw materials will ________ the price level and ________ real GDP.
A) raise; increase
B) raise; decrease
C) lower; increase
D) lower; decrease

Question

Quizplus · Accepted Answer

An increase in the price of raw materials will raise the cost of production for companies, leading to higher prices for consumers (raising the price level). At the same time, the higher costs may reduce the amount of goods produced or sold, leading to a decrease in real GDP.

In the Short-Run, an Increase in the Price of Raw