Because Not All Prices Adjust Instantly to Changing Conditions, an Unexpected

question 235

True/False

Because not all prices adjust instantly to changing conditions, an unexpected fall in the price level leaves some firms with higher-than-desired prices, and these higher-than-desired prices depress sales and induce firms to reduce the quantity of goods and services they produce.

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Definitions:

Preferred Stock

A class of ownership in a corporation that has a higher claim on its assets and earnings than common stock, often with dividends that are paid out before those to common shareholders.

Bonds Outstanding

The total amount of issued bonds that are currently held by investors and not yet redeemed.

Cost of Equity

The return that investors expect for investing in a company's equity, reflecting the compensation for the risk of investing.

Tax Rate

The percentage at which an individual or corporation is taxed by the government on their income or profit.