The Sticky Price Explanation of the Short-Run Aggregate Supply Curve

question 116

Multiple Choice

The sticky price explanation of the short-run aggregate supply curve says that when the average price level rises,

• A) some firms will immediately pass the higher prices to consumers.
• B) because of adjustment costs associated with changing prices, some firms will not raise their prices immediately which may temporarily boost their sales.
• C) firms will raise their output prices by more than the increase in the average price level to make up for the shortfall in sales.
• D) consumers are unwilling to pay higher prices resulting in a decrease in aggregate demand.

---

Definitions:

State-Supported Schools

Institutions primarily funded and managed by the government aimed at providing free or affordable education to the public.

Liberty

The situation in which an individual is not subject to overbearing restrictions by power figures on their lifestyle, behavior, or political thought.

Religious Liberty

The freedom to practice and observe one's religion without interference or suppression from the government or any other external forces.

State Constitutions

Legal documents that define the structure, functions, and powers of state government within the United States, each tailored to the specific needs and traditions of the individual state.