Suppose the Price Level Falls but Suppliers Only Notice That

question 38

Multiple Choice

Suppose the price level falls but suppliers only notice that the price of their particular product has fallen. Thinking there has been a fall in the relative price of their product, they cut back on production. This is a demonstration of the

• A) misperceptions theory of the short-run aggregate supply curve.
• B) classical dichotomy theory of the short-run aggregate supply curve.
• C) sticky-price theory of the short-run aggregate supply curve.
• D) sticky-wage theory of the short-run aggregate supply curve.

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Definitions:

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