If Prices Are "Sticky" in the Short Run, Then

question 215

Multiple Choice

If prices are "sticky" in the short run, then

• A) the economy will respond to demand shocks primarily through changes in output and employment.
• B) the economy will respond to demand shocks primarily through changes in prices and inflation.
• C) prices will adjust to equalize the quantities demanded and supplied of goods and services.
• D) unemployment will not change in response to a demand shock.

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Definitions:

Shoes

Footwear items designed to protect and provide comfort to the human foot while performing various activities.

Elasticity of Demand

A measure of how much the quantity demanded of a good changes in response to a change in the price of that good.

Taxes on Gasoline

Government-imposed charges on the sale of gasoline, typically used to fund transportation infrastructure and other public projects.

Tax Revenue

Government income generated from the imposition of taxes.