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:

Common Stock

Common stock represents ownership shares in a corporation, offering voting rights and potential dividends to shareholders.

Noncash Transaction

A transaction that does not involve the direct exchange of cash for goods or services, often involving bartering or trading.

Significant Noncash Activity

Transactions or activities that affect the financial statements of a company but do not involve cash inflow or outflow, such as depreciation or amortization.

Conversion of Bonds

The process where bondholders can exchange their bonds for a predetermined number of shares in the issuing corporation.