Assume That Wages in an Economy Do Not Fully Adjust

question 82

Multiple Choice

Assume that wages in an economy do not fully adjust to inflation. Other things constant, with an increase in inflation, _____.

• A) firms' marginal cost of production increases
• B) aggregate supply remains unchanged
• C) aggregate supply decreases
• D) firms' marginal cost of production falls

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Definitions:

Group Cohesion

The degree to which members of a group are drawn together and feel loyalty and togetherness.

Conformity

Adjusting one's behavior or beliefs to match those of others, often as a result of real or imagined group pressure.

Conversion Theory

The explanation that people are influenced by a minority because the minority’s distinctive position better captures their attention.

Reciprocity

The practice of exchanging things with others for mutual benefit, especially privileges or favors granted by one country or organization to another.