Which of the following is an example of a macroeconomic externality?
Select the correct answer below:
A. An increase in prices of cars in general prompts a firm to raise its prices to profit from increases in the demand. It is now able to also pay higher wages.
B. A global recession prompts firms to cut prices. Prices fall across the whole industry and wages are slashed to help companies survive the recession.
C. A decrease in aggregate demand should lead to a lower price level which could help the economy rebound. Prices remain high, however, as menu costs make it undesirable for individual firms to lower prices.
D. All of the above.
