Question

the economy experiences a decrease in the price level and an increase in real domestic output. which is a likely explanation? select one: a. the prices of imported resources have increased b. business costs and wage rates have decreased c. national income abroad has increased d. consumer incomes and the quantity of labor have decreased

Answer 1

The likely explanation for a decrease in the price level and an increase in real domestic output is b. a decrease in business costs and wage rates, as it allows for cheaper production and encourages an increase in output.

Step-by-step explanation:

The question asks what could explain a decrease in the price level and an increase in real domestic output. The most likely explanation is option B, which states that business costs and wage rates have decreased. When business costs, which can include the prices of inputs such as raw materials and labor, go down, companies can produce goods and services more cheaply. Since the cost of production is lower, the price level in the economy can decrease as businesses pass on the savings to consumers. Furthermore, the decrease in production costs can lead to an increase in real domestic output, as it becomes more affordable to produce a greater quantity of goods and services.