Based on price setting behavior,which of the following will cause an increase in the price level?
A)a reduction in productivity
B)an increase in the nominal wage
C)an increase in the markup
D)all of the above
E) none of the above

Question

Quizplus · Accepted Answer

A reduction in productivity would cause an increase in production costs, leading to an increase in prices. An increase in the nominal wage would also increase production costs, leading firms to increase prices to maintain profit margins. Finally, an increase in the markup (the difference between the price of a good or service and its production cost) would directly result in an increase in prices. Therefore, all three factors would cause an increase in the price level.

Based on Price Setting Behavior,which of the Following Will Cause