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

question 4

Multiple Choice

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

• A) In the Keynesian model, P is always equal to P^e because of sticky-wage assumption.
• B) In the Keynesian model, P may be different than P^e because of sticky-wage assumption^.
• C) In the Keynesian model, P is always greater than P^e because of sticky-wage assumption.
• D) In the Keynesian model, P is always less than P^e because of sticky-wage assumption.

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Definitions:

Cultural Diversity

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A type of norm that is formally defined and enacted in legislation.

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