In the Short Run in a Model with Sticky Prices

question 24

Multiple Choice

In the short run in a model with sticky prices:

• A)the labour input is procyclical.
• B)the average product of labour is procyclical.
• C)the real wage rate in countercyclical.
• D)all of the above.

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Definitions:

Consumer Surplus

The difference between what consumers are willing to pay for a good or service and what they actually pay, indicating the economic benefit to consumers.

Equilibrium Price

The market price at which the quantity of a good supplied equals the quantity demanded, resulting in market balance.

Surplus Amount

The quantity of a good or service that exceeds what is demanded at a given price.

Producer Surplus

The difference between what producers are willing to receive for a good compared to what they actually receive, essentially the profit.