If the Price Level Is Higher Than Expected,firms Might Raise

question 81

Multiple Choice

If the price level is higher than expected,firms might raise their production in the short run if

• A)the nominal wage they pay their employees was set based on the expected price level.
• B)prices are costly to adjust and they have set their price at some time in the past but are not ready to change it.
• C)they believe that the price of their product has risen relative to the price of other products,when in fact the rise in the price of their product reflects an increase in the general price level.
• D)All of the above are correct.

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Definitions:

Financial Intermediaries

Entities such as banks and credit unions that serve as middlemen in financial transactions, facilitating funds' flow between savers and borrowers.

Bond Buyer

An investor or entity that purchases bonds, which are debt securities issued by corporations or governments.

Interest Rate

It refers to the profit or cost of borrowing capital, typically expressed as an annual percentage.

Sound Finances

A term describing a stable and healthy financial condition characterized by manageable levels of debt and efficient budgeting.