Section+28.+Review+II - ECON 101B: Section 28 - Review...

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Unformatted text preview: ECON 101B: Section 28 - Review Handout Date: 04/29/2011 Chapter 13 1. In the sticky-price model, prices are sticky in the short run because: a. some prices are set by long-term contracts and cannot be changed in the short run. b. once a &rm has printed and distributed its catalog or price list, it is costly to change prices. c. &rms base their prices on the costs of production, which include labor costs, and wages may be sticky because they depend on social norms that evolve slowly over time. d. All of the above are true. 2. In the sticky-price model: a. all &rms adjust prices instantly in response to changes in demand. b. no &rms adjust prices instantly in response to changes in demand. c. some &rms adjust prices instantly in response to changes in demand while others do not. d. output is constant. 3. If all &rms in the economy have &xed prices in the short run: a. the short-run and long-run aggregate supply curves will be identical. b. the short-run aggregate supply curve will be vertical. c. the short-run aggregate supply curve will be horizontal. d. None of the above are true. 4. In the sticky-price model, the equation p = P + a ( Y & Y ) describes the behavior of: a. a &rm with exible prices in the short run. b. a &rm with sticky prices in the short run. c. all &rms in the short run. d. all &rms in the long run but no &rms in the short run. 5. In the sticky-price model, the equation p = EP + a ( EY & E Y ) describes the behavior of: a. a &rm with exible prices in the short run. b. a &rm with sticky prices in the short run. c. all &rms in the short run. d. all &rms in the long run but no &rms in the short run. 6. In the sticky-price model, the equation Y = Y + & ( P & EP ) describes the behavior of: a. each and every &rm in both the short run and the long run. b. the overall economy in both the short run and the long run. c. both a and b. d. small &rms but not large &rms. 7. According to the imperfect-information model, when prices unexpectedly rise, suppliers infer that their relative prices have ______________, which induces them to _____________ output. a. increased; increase b. decreased; decrease c. increased; decrease d. decreased; increase 8. Recent work on imperfect information models: a. stresses the increasingly limited availability of information. b. stresses the limited ability of individuals to incorporate information about the economy into their decisions. c. has found that people do not make forecasts about relative prices. d. stresses all of the answers. 9. Both the imperfect information and sticky-price models can explain why countries with variable aggregate demand have short-run aggregate supply curves that are: a. at. b. steep. c. horizontal. d. vertical....
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Section+28.+Review+II - ECON 101B: Section 28 - Review...

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