Each of the Three Models of Short-Run Aggregate Supply Is

question 52

Multiple Choice

Each of the three models of short-run aggregate supply is based on some market imperfection.In the sticky-price model,the imperfection is that:

• A) some firms do not adjust their prices instantly to changes in demand.
• B) contracts and arrangements may prevent nominal wages from adjusting rapidly to changing economic conditions.
• C) firms confuse changes in the overall level of prices with changes in relative prices.
• D) the real wage adjusts to bring labour supply and labour demand into equilibrium.

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