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Consider the Following Short Run Aggregate Supply Equation

Question 1

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Consider the following short run aggregate supply equation:
Consider the following short run aggregate supply equation:     where Y is the real output   is the full employment output, P and P<sup>e</sup> are the actual and expected price levels, respectively. Which of the following is correct? A)  In the Keynesian model, b is positive because of the sticky wage assumption. B)  In the classical model, b is zero because of the price misperception assumption. C)  In the Keynesian model, b is zero because of the sticky wage assumption. D)  Both A and C are correct. where Y is the real output Consider the following short run aggregate supply equation:     where Y is the real output   is the full employment output, P and P<sup>e</sup> are the actual and expected price levels, respectively. Which of the following is correct? A)  In the Keynesian model, b is positive because of the sticky wage assumption. B)  In the classical model, b is zero because of the price misperception assumption. C)  In the Keynesian model, b is zero because of the sticky wage assumption. D)  Both A and C are correct. is the full employment output, P and Pe are the actual and expected price levels, respectively. Which of the following is correct?


A) In the Keynesian model, b is positive because of the sticky wage assumption.
B) In the classical model, b is zero because of the price misperception assumption.
C) In the Keynesian model, b is zero because of the sticky wage assumption.
D) Both A and C are correct.

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