Question

In the short run, a rise in the price level brings a ________ money wage rate that ________ profits which leads to ________ production.

Answer 1

In the short run, a rise in the price level brings a FALL in the money wage rate that INCREASES profits which leads to INCREASING production.

Explanation: The amount of money paid is called the money wages. If the price level increases, the money wage rate will decline since there is a negative relationship between wage rate and price level. A fall in the money wages which are to be paid by the business owners to their labourers will increase the share of profits, leading to increased production.