If Real Wages Are Sticky and Export Demand Permanently Declines

question 49

Multiple Choice

If real wages are sticky and export demand permanently declines, then

• A)import prices will fall
• B)the domestic currency will appreciate
• C)a recession will result, but it will be short-lived since nominal wages will adjust immediately
• D)a prolonged period of unemployment will result
• E)the current account will show a surplus

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Definitions:

Long-Term Storage

The phase of memory in which information is retained for extended periods, potentially for a lifetime.

Recency Effect

In free recall, the tendency to recall items at the end of the list more readily than those in the middle.

Memory Consolidation

The biological process through which memories are transformed from a transient and fragile status to a more permanent and robust state; according to most researchers, consolidation occurs over the course of several hours.

Primacy Effect

In free recall, the tendency to recall the first items on the list more readily than those in the middle.