Assuming Prices and Wages Are Flexible, a Recession Will Decrease

question 92

Multiple Choice

Assuming prices and wages are flexible, a recession will decrease the price level, which:

• A)raises nominal wages, and which eventually decreases the short-run aggregate supply curve, thus decreasing real output to its original level.
• B)raises nominal wages, and which eventually increases the short-run aggregate supply curve, thus increasing real output to its original level.
• C)reduces nominal wages, and which eventually decreases the short-run aggregate supply curve, thus decreasing real output to its original level.
• D)reduces nominal wages, and which eventually increases the short-run aggregate supply curve, thus increasing real output to its original level.

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Definitions:

Hypothesis Testing

A method of statistical inference used to decide whether a hypothesis about a parameter in a population is likely to be true.

Interval Estimation

A scope of values, from collected sample data, that is likely to embody the value of an unexplored population parameter.

Confidence Interval

A range of values, derived from the sample statistics, within which there is a specified level of confidence where the true parameter lies.

Standard Error

The standard deviation of the sampling distribution of a statistic, typically mean, estimating the variability.