When the economy's actual price level exceeds the expected price level in the short run: A) the...
Question:
When the economy's actual price level exceeds the expected price level in the short run:
A) the real wage of workers decline
B) the nominal wages of workers increase
C) firms decrease output below the potential level
D) the economy produces the natural rate of output
E) cyclical unemployment in the economy falls to zero
Aggregate Supply
The reasons behind the upward or positive slope of the aggregate supply curve are as follows:
1) Imperfect information model
2) Sticky wage model
4) Sticky price model.
Answer and Explanation: 1
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View this answerThe answer is option A.
Let Nominal wage = W
Targeted Real wage = w
Expected price level = {eq}P^e {/eq}
Actual price level = P
{eq}w =...
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Aggregate Supply in the Economy: Definition and Determinants
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Chapter 7 / Lesson 7
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Learn the definitions of aggregate supply and aggregate demand. See the determinants of aggregate supply, the determinants of aggregate demand, and what causes them to shift.
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