Question 1

Other things the same,if workers and firms expected inflation to be 2%,but it is only 1% then

Accepted Answer

The answer of Other things the same,if workers and firms...

Question 2

Other things the same,an unexpected fall in the price level results in some firms having

Accepted Answer

An unexpected fall in the price level means that some firms may have set their prices higher than the new market level, making their goods relatively more expensive, which can depress their sales.

Question 3

Which of the following can explain the upward slope of the short-run aggregate supply curve?

Accepted Answer

The upward slope of the short-run aggregate supply curve can be explained by the fact that nominal wages are slow to adjust to changing economic conditions. As a result, when the price level increases, firms can produce more output at a higher price without having to increase their labor costs immediately. This is why the short-run aggregate supply curve slopes upwards.

Question 4

Other things the same,if the price level rises by 2% and people were expecting it to rise by 5%,then some firms have

Accepted Answer

If people were expecting a 5% increase in the price level but it only rises by 2%, firms will have higher than desired prices which will depress their sales. Consumers may choose to purchase goods and services from firms that did not raise their prices as much or look for substitutes, leading to decreased sales for these firms.

Question 5

Other things the same,if prices fell when firms and workers were expecting them to rise,then

Accepted Answer

The answer of Other things the same,if prices fell when...

Question 6

People had been expecting the price level to be 120 but it turns out to be 122.In response Robinson Tire Company increases the number of workers it employs.What could explain this?

Accepted Answer

The sticky price theory suggests that prices do not adjust immediately to changes in economic conditions, leading firms to adjust output and employment. The sticky wage theory suggests that wages are slow to adjust, causing firms to hire more workers when prices rise unexpectedly. Both theories can explain why Robinson Tire Company increases employment when the price level is higher than expected.

Question 7

If there are sticky wages,and the price level is greater than what was expected,then

Accepted Answer

When the price level is higher than expected and wages are sticky, firms experience higher profits and are incentivized to increase production, leading to a movement to the right along the short-run aggregate supply curve.

Question 8

The sticky-price theory of the short-run aggregate supply curve says that when the price level is higher than expected,some firms will have

Accepted Answer

When the price level is higher than expected, some firms with sticky prices will have lower than desired prices, making their goods relatively cheaper, which leads to an increase in the aggregate quantity of goods and services supplied.

Question 9

Sticky nominal wages can result in

Accepted Answer

The answer of Sticky nominal wages can result in
...

Question 10

When the price level rises more than expected,a firm with a sticky price will sell its output at a price that is

Accepted Answer

When the price level rises more than expected, a firm with a sticky price will find its prices lower than the market level, leading to increased demand for its products. To meet this demand, the firm will increase its production.

Question 11

Other things the same,if workers and firms expected prices to rise by 2 percent but instead they rise by 3 percent,then

Accepted Answer

When prices rise more than expected, firms may see higher profits and increase production, leading to higher employment.

Question 12

The sticky-wage theory of the short-run aggregate supply curve says that the quantity of output firms supply will increase if

Accepted Answer

According to the sticky-wage theory, in the short run, firms respond to unexpected changes in the price level. If the price level is higher than expected, firms' production becomes more profitable as wages have not yet adjusted to the new level, leading to an increase in the quantity of output supplied.

Question 13

The sticky-price theory of the short-run aggregate supply curve says that if the price level rises by 5% and people were expecting it to rise by 2%,then firms have

Accepted Answer

According to the sticky-price theory, if the actual price level rises more than expected, firms will have lower than desired prices because they set prices based on expected inflation. This discrepancy leads firms to increase production to meet the higher demand at these lower relative prices, thus increasing the aggregate quantity of goods and services supplied.

Question 14

Menu costs help explain

Accepted Answer

Menu costs help explain sticky-price theory, sticky-wage theory, and misperceptions theory.

Question 15

Other things the same,if the money supply rises by 2% and people were expecting it to rise by 5%,then some firms have

Accepted Answer

If the money supply rises by less than expected, firms may have set their prices higher than desired based on the expectation of a 5% increase. This discrepancy can lead to depressed sales as the actual increase in money supply is only 2%, reducing the purchasing power relative to expectations.

Question 16

If wages are sticky,then a greater than expected increase in the price level

Accepted Answer

If wages are sticky, they do not immediately adjust to changes in the price level. Therefore, a greater than expected increase in the price level reduces the real wage (cost of labor), which reduces the real costs of production, leading to an increase in the aggregate quantity of goods and services supplied.

Question 17

Other things the same,when the price level rises more than expected,some firms will have

Accepted Answer

When the price level rises more than expected, some firms may have set their prices lower than the new market level, making their goods relatively cheaper and increasing their sales.

Question 18

An unexpected increase in the price level that temporarily lowers real wages and induces more employment and output in an economy,occurs in

Accepted Answer

This is a classic example of the sticky-wage theory, which suggests that nominal wages are slow to adjust to changes in the price level. In this scenario, an unexpected increase in the price level leads to a temporary decrease in real wages, which incentivizes firms to hire more workers and increase output in the short run.

Question 19

If the price level rises above what was expected and nominal wages are fixed,then

Accepted Answer

When the price level rises above expectations and nominal wages are fixed, firms receive higher prices for their goods while their wage costs remain constant, making production more profitable. As a result, firms are likely to hire more workers to increase production.

Question 20

The sticky-price theory implies that

Accepted Answer

The sticky-price theory suggests that prices adjust slowly, resulting in an upward-sloping short-run aggregate-supply curve (A). When prices fall unexpectedly, firms may not be able to adjust their prices immediately, resulting in a reduction in the quantity of goods and services they produce (B). Menu costs, which refer to the costs of changing prices, influence the speed of adjustment of prices and are a key element of the sticky-price theory (C). Therefore, all of the above statements (A, B, and C) are correct.

Quiz 20: Aggregate Demand and Aggregate Supply: The Aggregate-Supply Curve