When aggregate demand declines, the price level may remain constant, at least for a time, because:
A. firms individually may fear that their price cut may set off a price war.
B. menu costs rise.
C. price cuts tend to increase efficiency wages.
D. product markets are highly competitive.
A. firms individually may fear that their price cut may set off a price war.
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What best explains the pattern of bank collapses in the US?
a. The vast majority of banks closed early in the decade and the closing dropped significantly in the latter half of the decade. b. Banks collapsed consistently throughout the 1930s. c. The failure rate was relatively low early in the decade and grew steadily throughout the period.
Assume that the AD curve is held constant and short-run aggregate supply decreases. The result is a(n):
a. increase in both equilibrium real GDP and the price level. b. decrease in equilibrium real GDP and an increase in the price level. c. decrease in both equilibrium real GDP and the price level. d. decrease in equilibrium real GDP, while the price level remains fixed. e. increase in the price level, while equilibrium real GDP remains fixed.