Rigidities That Diminish Wage and Price Flexibility Such as Long-Term

question 11

Multiple Choice

Rigidities that diminish wage and price flexibility such as long-term contracts suggest that an increase in the expected price level

• A)might not translate into complete adjustment of wages and prices.
• B)might cause aggregate demand to decrease.
• C)might cause aggregate supply to increase.
• D)will have no effect on the short-run aggregate supply curve.

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Definitions:

Emotional Lability

The propensity for rapid, often unpredictable changes in emotion.

Correspondent Inference

A theory suggesting that people infer the motives and dispositions of others from observable behaviors, especially if the behaviors are unexpected.

Causal Inference

The process of determining the cause-and-effect relationship between variables, typically assessed through controlled experiments or observational studies.

Cognitive Heuristics

Shortcuts or rules of thumb that the mind uses to quickly form judgments and make decisions.