Business cycles disappear when firms
A)hold nominal wages constant as nominal demand changes.
B)hold prices constant as nominal demand changes.
C)change prices proportionately with nominal demand changes.
D)change wages proportionately with nominal demand changes.

Question

Quizplus · Accepted Answer

Business cycles, characterized by fluctuations in economic activity, can be mitigated when firms adjust their prices in direct proportion to changes in nominal demand. This helps maintain the real purchasing power and stabilizes the economy by preventing significant booms and busts.

Business Cycles Disappear When Firms