Question

QUESTION 62

1. If there are sticky wages, and the price level is greater than what was expected, then

   	a.	the quantity of aggregate goods and services supplied rises, as shown by a shift of the short-run aggregate supply curve to the right.
   	b.	the quantity of aggregate goods and services supplied falls, as shown by a movement to the left along the short-run aggregate supply curve.
   	c.	the quantity of aggregate goods and services supplied rises, as shown by a movement to the right along the short-run aggregate supply curve.
   	d.	the quantity of aggregate goods and services supplied falls, which is shown by a shift of the short-run aggregate supply curve to the left.

1 points   

QUESTION 63

1. In the long run, an increase in the stock of human capital

   	a.	and increases in the money supply both make the price level rise.
   	b.	makes the price level rise, while increases in the money supply make prices fall.
   	c.	and increases in the money supply both make the price level fall.
   	d.	makes the price level fall, while increases in the money supply make prices rise.

Answer 1

62. Option C.

• The sticky wage theory states that the wages changes slowly in accordance with the changes in the economy.
• When the price level is greater than expected, then firms will earn enough to compensate the production costs.
• Hence the quantity of aggregate goods and services supplied rises.
• This is observed as a movement to the right along the short run aggregate supply curve.

63. Option D.

• In the long run, when the stock of human capital increases it leads to specialization.
• We know that, higher specialization will increase the level of productivity within a firm.
• This will decrease the price level of goods and services.
• But when the money supply increases, the inflation increases within the economy. This will hence increase the price level.