In the Short Run with a Model with Sticky Prices

question 31

Multiple Choice

In the short run with a model with sticky prices a negative monetary surprise:

• A)increases labour demand.
• B)decreases real output.
• C)increases the real wage.
• D)all of the above.

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Definitions:

Self-correcting Forces

Economic mechanisms that naturally work to restore equilibrium in markets without government intervention.

Potential GDP

The maximum output an economy can produce without triggering inflation, if it fully employs all available resources, including labor and capital.

Expansionary Gap

A situation where the actual level of output in an economy exceeds its potential output, often leading to inflation.

Active Approach

An active approach in policy-making or investment strategy entails ongoing, deliberate interventions or decisions to achieve specific economic or financial goals.