Answer to Question #135735 in Macroeconomics for Valerie

Question

Choose the correct answer
Which of the following policy action may cause policy dilemma?
[1] reducing the interest rate to boost investment and economic growth.
[2] Setting a lower price level to increase real wages in the economy.
[3] Appling policy measures to reduce population growth and unemployment.
[4] providing drought relieve to increase total production in the economy.

Answer 1

solution

(2) Setting a lower price level to increase real wages in the economy may cause policy dilemma.if there will be cut in wages then it will cause fall in spending because people have less income.due to it there will be reduce in aggregate demand and therefore lead to lower economical growth , so setting lower price may not boost demand for labor.