When Firms Preset Prices in the Short-Term,economy-Wide Spending Changes Are

question 83

Multiple Choice

When firms preset prices in the short-term,economy-wide spending changes are the primary cause of

• A) frictional unemployment.
• B) output gaps.
• C) inflation.
• D) the growth of potential output.
• E) structural unemployment.

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Definitions:

Purely Competitive Market

A market structure characterized by many buyers and sellers, all of whom are selling identical products, allowing no single participant to influence market prices.

Profit-maximizing Combination

The selection of production inputs and output levels that allow a firm to achieve the highest possible profit given market conditions.

Marginal Product

The additional output that results from using one more unit of input, holding all other inputs constant in the production process.

Purely Competitive Market

A market structure characterized by many buyers and sellers, homogenous products, and free entry and exit, leading to price determination by supply and demand forces.