If Prices and Wages Are Slow to Adjust ("Sticky," Rather

question 18

Multiple Choice

If prices and wages are slow to adjust ("sticky," rather than flexible) :

• A)inflation would adjust rapidly.
• B)output gaps would disappear quickly.
• C)inflation would adjust to output gaps sluggishly.
• D)the short-run aggregate supply curve would not shift.

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Definitions:

Mere Exposure Effect

A psychological phenomenon whereby individuals develop a preference for things simply because they are familiar with them.

Proximity Hypothesis

The theory that individuals will form relationships or have positive feelings towards things or people that are physically close to them.

Frequency Paradox

A concept indicating the mismatch between the perceived frequency of occurrence of an event and its actual frequency.

Expert Power

The influence one possesses owing to one's expertise, skills, or knowledge in a specific domain.