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.

Question

Cade Delacruz

Business

15 May, 00:46

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.

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Kyson Ramirez · Answer 1

Consider the following explanation

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.