To Study Macroeconomics, One Needs Various Models with Different Assumptions

question 53

Multiple Choice

To study macroeconomics, one needs various models with different assumptions about the flexibility and/or stickiness of price levels.This is because:

• A)the economy behaves similarly to demand shocks regardless of the length of time.
• B)the price flexibility is a short-run phenomenon while, the price stickiness is a long-run phenomenon.
• C)the economy behaves so differently depending on how much time has passed after a demand shock.
• D)various government policies are useless to eliminate the effects of an unexpected demand shock.

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Definitions:

Non-collusive Oligopolist

A firm in an oligopoly market structure that independently sets prices or output levels without engaging in explicit agreements with rivals.

Equilibrium Price

The price at which the quantity of a good or service supplied equals the quantity demanded, resulting in no surplus or shortage in the market.

Equilibrium Quantity

The quantity of goods or services supplied and demanded at the equilibrium price, where market supply and demand balance each other.

Payoff Matrix

A table that displays the potential outcomes and strategies for each player in a game, used in game theory to determine the best strategies and predict the actions of the participants.