If Resource Prices Are "Sticky" Downward and a Recessionary Gap

question 116

Multiple Choice

If resource prices are "sticky" downward and a recessionary gap develops,the short-run aggregate supply curve will:

• A)shift leftward to return the economy to its potential output.
• B)shift rightward to return the economy to its potential output.
• C)become a horizontal straight line.
• D)not shift rightward to return the economy to its potential output.
• E)become the long-run aggregate supply curve.

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Definitions:

Demand Conditions

The characteristics and preferences of consumers that influence their desire and ability to purchase goods and services.

Profit Maximization

The process by which a firm determines the price and output level that generates the maximum profit.

Entry Barriers

Obstacles that prevent or hinder new competitors from easily entering an industry or area of business.

Competitive Price-Searcher

A market characteristic where firms actively seek to set prices competitively, often through differentiation, to attract customers.