If the Price Level Is Higher Than Expected,firms Might Raise

question 81

Multiple Choice

If the price level is higher than expected,firms might raise their production in the short run if

• A)the nominal wage they pay their employees was set based on the expected price level.
• B)prices are costly to adjust and they have set their price at some time in the past but are not ready to change it.
• C)they believe that the price of their product has risen relative to the price of other products,when in fact the rise in the price of their product reflects an increase in the general price level.
• D)All of the above are correct.

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Definitions:

Ordinal Scale

A scale of measurement in which the magnitude or rank order is implied; however, the distance between measurements is unknown.

Rank Order

A rating scale providing a series of statements that the respondent is asked to place from highest to lowest based on his or her preferences.

Magnitude

The size, extent, or importance of something, often measured in terms of its scale, intensity, or impact.

Internal Consistency Reliability

A measure of how well the items on a test measure the same construct or concept, indicating the test's reliability.