Using the Sticky-Price Model, the Higher the Average Rate of Inflation

question 19

Multiple Choice

Using the sticky-price model, the higher the average rate of inflation, the more frequently firms must adjust their prices, which implies that a high rate of inflation:

• A) has no effect on the slope of the short-run aggregate supply curve.
• B) should make the short-run aggregate supply curve flatter.
• C) makes the short-run aggregate supply curve steeper.
• D) causes prices to be sticky.

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Definitions:

Defective Items

Products that fail to meet quality standards or specifications.

Estimate

To determine an approximate calculation or judgment of a numerical value.

Percentage

A number or ratio expressed as a fraction of 100, used to specify a portion of a whole.

Population

The entire group of individuals or items that are the subject of a statistical investigation.