In the context of 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.

Question

Quizplus · Accepted Answer

A higher rate of inflation leads to more frequent price adjustments by firms, reducing price stickiness and making the short-run aggregate supply curve steeper.

In the Context of the Sticky-Price Model, the Higher the Average