According to the Sticky-Price Model, Output Will Be at the Natural

question 9

Multiple Choice

According to the sticky-price model, output will be at the natural level if:

• A) firms expect a high price level and the demand for goods is high.
• B) the proportion of firms with flexible prices equals the proportion of firms with sticky prices.
• C) the price level equals the expected price level.
• D) expectations are formed adaptively, but not if expectations are formed rationally.

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Definitions:

Horizontal Merger

The combination of two or more companies that operate in the same industry or produce similar products or services.

Automobile Company

A business that specializes in the manufacturing, design, marketing, or selling of motor vehicles.

Cooperative

An organization that is owned and operated by its members, who share the profits and benefits and democratically make decisions.