2 question to ask you about Macroeconomic Theory

| November 24, 2016

I got 2 question to ask you about Macroeconomic Theory.I just want you to explain the answers.

1) If labor participation increases,what does the classical theory predict about what will happen to (a)GDP, (b)Employment, (c)the real wage, (d)the price level?
Answers:
a) GDP : Increases
b) Employment: Increases
c) The real wage: Decreases
d) The price level: Decreases
Can you explain why the above variables are increase or decrease?

2) What does classical theory predict about the effect of a positive increase in labor productivity on the price level?
Answers:
Decrease in P
Can you explain why?

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