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

question 35

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 classical model,P is always equal to Pᵉ because of price misperception assumption.
• B)In the classical model,P may be different than Pᵉ because of price misperception assumption.
• C)In the classical model,P is always greater than Pᵉ because of price misperception assumption.
• D)In the classical model,P is always less than Pᵉbecause of price misperception assumption.

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Definitions:

Supply Chain Performance

An assessment of how effectively and efficiently a supply chain operates, often evaluated with metrics like delivery times, costs, and product quality.

Supply Chain Cost

All expenses incurred in the production, handling, and distribution of a product or service, from raw materials to delivery to the end user.

Responsiveness

The ability of a company, organization, or system to quickly and effectively react to changes, inquiries, or demands.

Total Demand

The entire quantity of a product or service that consumers in a market are willing and able to buy over a specified time period, given all other factors being constant.