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.

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