If Firms Set Prices and Then Keep Them Fixed for a Period

question 94

Multiple Choice

If firms set prices and then keep them fixed for a period of time, their fixed prices imply that

• A)the aggregate price level is fixed and that aggregate demand determines the quantity of goods and services sold.
• B)prices are set by aggregate demand and supply.
• C)the aggregate price level is fixed and that aggregate supply determines the quantity of goods and services sold.
• D)the aggregate price level adjusts continuously.

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Definitions:

Service

An intangible commodity that involves providing labor or helpful activities to others without producing physical goods.

Intangible Activity

Economic or business activity that is not physical in nature, often related to services, knowledge, or intellectual property.

Tangible

Physical objects or assets that can be seen, touched, and measured.

Physical

is related to material things or bodies rather than the mind or spirit, often used in terms of physical properties or possessions.