All of the following statements about sticky prices are true except:
A) in the short run, some wages and prices are sticky.
B) the sticky-price model describes the equilibrium toward which the economy slowly gravitates.
C) for studying year-to-year fluctuations, most macroeconomists believe that price stickiness is a better assumption than is price flexibility.
D) magazine publishers tend to change their newsstand prices only every three or four years.

Question

Quizplus · Accepted Answer

The sticky-price model does not describe the equilibrium toward which the economy slowly gravitates. Instead, it explains how prices and wages can be slow to adjust to economic changes, leading to short-term non-equilibrium situations in the economy.

All of the Following Statements About Sticky Prices Are True