The Sticky-Price Theory of the Short-Run Aggregate Supply Curve Says

question 30

Multiple Choice

The sticky-price theory of the short-run aggregate supply curve says that if the price level rises by 5% while firms were expecting it to rise by 2%, then some firms with high menu costs will have

• A)higher than desired prices, which leads to an increase in the aggregate quantity of goods and services supplied.
• B)higher than desired prices, which leads to a decrease in the aggregate quantity of goods and services supplied.
• C)lower than desired prices, which leads to an increase in the aggregate quantity of goods and services supplied.
• D)lower than desired prices, which leads to a decrease in the aggregate quantity of goods and services supplied.

Understand how hypothesis testing is used to make inferences about population parameters based on sample statistics.

Understand the concepts of Type I and Type II errors and how changing levels of significance (α) and sample sizes (n) affect these errors.

Understand the definition, calculation, and interpretation of a test's power and its relationship to Type II errors.

Demonstrate the ability to calculate and interpret confidence intervals in the context of hypothesis testing.

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Definitions:

Desire

A strong feeling of wanting to have something or wishing for something to happen.

Manager

An individual responsible for controlling or administering all or part of a company or similar organization.

Reward Power

The capacity to offer something of value as a means to influence the behavior of others.

Influence

The capacity to have an effect on the behavior, development, or character of someone or something.