64.7k views
5 votes
Consider the three theories of the upward slope of the short-run aggregate-supply curve. a. According to the sticky-wage theory, the economy is in a recession because the price level has declined so that labor demand is too . True or False: b. According to the sticky-price theory, the economy is in a recession because people expect prices to rise quickly in a recession. True False c. According to the misperceptions theory, the economy is in a recession when the price level is what was expected.

User Keidakida
by
8.5k points

1 Answer

4 votes

Answer:

Consider the following explanation

Step-by-step explanation:

a. the economy is in a recession because the price level has declined so that real wages are too high, thus labour demand is too low. False.

b. According to the new Keynesian sticky-price theory, the economy is in a recession because not all prices fall enough. Over time, firms are able to adjust their prices more fully and the economy returns to the long-run aggregate-supply curve. True.

c. According to the misperceptions theory, the economy is in a recession when the price level is below what was expected. True.

User RoberMP
by
8.4k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.