Assignment_4-1

# Assignment_4-1 - ECON 410.502 Macroeconomic Theory Spring...

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Page 1 ECON 410.502 Macroeconomic Theory Spring 2010 Instructor: Guangyi Ma Assignment #4 Notice : (1) There are 25 multiple-choice problems and 2 analytic (short-answer) problems. This assignment is due on April 16, 2010 , class time. Please submit before the class starts. (2) Solutions of this assignment will be posted on the web after the due date. Name: ____________________

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Page 2 Problem 1~25: Multiple choice problems Please choose your answer and circle the corresponding capital letter (A, B, C, D) 1. Some firms do not instantly adjust the prices they charge in response to changes in demand for all of the following reasons except : A) it is costly to alter prices. B) they do not want to annoy their frequent customers. C) prices do not adjust when there is perfect competition. D) some prices are set by long-term contracts between firms and customers. 2. According to the sticky-price model, other things being equal, the greater the proportion, s , of firms that follow the sticky-price rule, the ______ the ______ in output in response to an unexpected price increase. A) greater; increase B) smaller; increase C) greater; decrease D) smaller; decrease 3. In the sticky-price model, the relationship between output and the price level depends on: A) the proportion of firms with flexible prices. B) the target real wage rate. C) the target nominal wage rate. D) the implicit agreements between workers and firms. 4. According to the sticky-price model, output will be at the natural level if: A) firms expect a high price level and the demand for goods is high. B) the proportion of firms with flexible prices equals the proportion of firms with sticky prices. C) the price level equals the expected price level. D) expectations are formed adaptively, but not if expectations are formed rationally. 5. The imperfect-information model bases the difference in the short-run and long-run aggregate supply curve on: A) sticky wages. B) sticky prices. C) temporary misperceptions about prices. D) procyclical real wages.
Page 3 6. According to the imperfect-information model, when the price level rises and the producer expects the price level to rise, the producer: A) increases production. B)

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Assignment_4-1 - ECON 410.502 Macroeconomic Theory Spring...

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