When Aggregate Demand Declines, the Price Level May Remain Constant

question 139

Multiple Choice

When aggregate demand declines, the price level may remain constant, at least for a time, because

• A)firms individually may fear that their price cut may set off a price war.
• B)menu costs rise.
• C)price cuts tend to increase efficiency wages.
• D)product markets are highly competitive.

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Definitions:

Sediment

Particulate matter that accumulates in layers on the Earth's surface, deposited by water, wind, ice, or biological activity.

Esker

A long, winding ridge of stratified sand and gravel, deposited by meltwater from a retreating glacier or ice sheet.

Sediment

Particles of rock, minerals, or organic materials that have been transported and deposited by wind, water, or ice.

Arête

A narrow ridge of rock which is typically formed by the erosion of two glaciers from opposite sides.