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:

Independent Variable

A variable in an experiment or model that is manipulated or categorized to observe its effect on the dependent variable(s).

Least Squares Estimate

A statistical method used to determine the line of best fit by minimizing the sum of the squares of the differences between observed values and those predicted by the model.

Independent Variable

In scientific research, the factor that is deliberately adjusted or controlled to test its effect on the outcome being studied.

Regression Equation

A formula that represents the relationship between a dependent variable and one or more independent variables, used to predict or estimate outcomes.