The Sticky-Price Theory of the Short-Run Aggregate Supply Curve Says

Multiple Choice

The sticky-price theory of the short-run aggregate supply curve says that if the price level rises by 5% while firms were expecting it to rise by 2%, then some firms with high menu costs will have

A) higher than desired prices, which leads to an increase in the aggregate quantity of goods and services supplied.
B) higher than desired prices, which leads to a decrease in the aggregate quantity of goods and services supplied.
C) lower than desired prices, which leads to an increase in the aggregate quantity of goods and services supplied.
D) lower than desired prices, which leads to a decrease in the aggregate quantity of goods and services supplied.