Consider the Following Short Run Aggregate Supply Equation: Y = $\hat Y$

question 53

Multiple Choice

Consider the following short run aggregate supply equation: Y = $\hat Y$ + b (P - Pᵉ) ,where Y is the real output, $\hat Y$ is the full employment output,P and Pᵉ are the actual and expected price levels,respectively.Which of the following is correct?

• A)In the Keynesian model,b is positive because of the sticky wage assumption.
• B)In the Keynesian model,b is zero because of the sticky wage assumption.
• C)In the classical model,b is zero because of the price misperception assumption.
• D)Both A and C are correct.

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Definitions:

Operating Activities

The day-to-day functions of a business related to producing and delivering its goods and services, as reflected in its cash flow.

Balance Sheet

A financial statement that provides a snapshot of a company's financial condition at a specific time, detailing assets, liabilities, and equity.

Income Statement

A financial report that shows a company's revenues and expenses over a specific period, ultimately revealing the net profit or loss.

Property, Plant

Refers to the long-term assets owned by a company that are used in its operations, including land, buildings, and machinery.