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two events occur simultaneously in the market for automobiles (1) the wages that are paid by...

two events occur simultaneously in the market for automobiles (1) the wages that are paid by the automobile companies (2) the economy contracts rapidly (which decreases consumers' income. An economist would predict a certainty that:

A. equilibrium of quantity falls
B. equilibrium of price falls
C. equilibrium of quantity rises
D. equilibrium of price rises
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Answer #1

Since wages decline and economy contracts the overall spending and consumption power reduces dramatically causing aggregate demand to fall and subsequently inflation falls which means equilibrium of price falls.

Hence, solution is Option B.

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