According to the Sticky-Wage Theory of the Short-Run Aggregate Supply

question 209

Multiple Choice

According to the sticky-wage theory of the short-run aggregate supply curve,if workers and firms expected prices to rise by 4 percent,but instead they rise by 2 percent,then

• A) employment and production rise.
• B) employment rises and production falls.
• C) employment falls and production rises.
• D) employment and production fall.

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Definitions:

Buyers

Individuals or entities that purchase goods or services for personal use, resale, or to add value in a production process.

Sellers

Persons or organizations that provide products or services to be purchased in the marketplace.

Price Ceiling

A maximum price sellers are allowed to charge for a good or service; a form of price control.

Excise Tax

is a tax applied to specific goods or services, such as alcohol or tobacco, usually with the aim of reducing consumption or raising revenue.