If Wages and Prices Adjust Slowly,we Would Expect Expansionary Monetary

question 186

Multiple Choice

If wages and prices adjust slowly,we would expect expansionary monetary policy to be

• A)less likely to reduce the natural unemployment rate.
• B)more likely to reduce inflation.
• C)more likely to affect the unemployment rate.
• D)more likely to result in a vertical short-run Phillips curve.

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Definitions:

Price Elasticity of Supply

This measures how much the quantity supplied of a good changes in response to a change in the price of that good.

Midpoint Formula

A method used in economics to calculate the elasticity of a variable, such as demand or supply, based on changes in price and quantity from a midpoint on a curve.

Elastic

Describes a situation in economics where the demand or supply for a good or service significantly changes in response to a change in price.

Perfectly Inelastic

A situation in market demand or supply where the quantity demanded or supplied does not change regardless of changes in price.