Multiple Choice
Each of the two models of short-run aggregate supply is based on some market imperfection. In the sticky-price model, the imperfection is that:
A) some firms do not adjust their prices instantly to changes in demand.
B) expectations are formed adaptively rather than rationally.
C) firms confuse changes in the overall level of prices with changes in relative prices.
D) the real wage adjusts to bring labour supply and labour demand into equilibrium.
Correct Answer:
Verified
Correct Answer:
Verified
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