Multiple Choice
Consider the following short run aggregate supply equation: Y = + b (P - Pᵉ) ,where Y is the real output, is the full employment output,P and Pᵉ are the actual and expected price levels,respectively.Which of the following is correct?
A) In the Keynesian model,b is positive because of the sticky wage assumption.
B) In the Keynesian model,b is zero because of the sticky wage assumption.
C) In the classical model,b is zero because of the price misperception assumption.
D) Both A and C are correct.
Correct Answer:
Verified
Correct Answer:
Verified
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