Multiple Choice
Which of the following is a major global force currently affecting the U.S. economy and politics?
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1. Introduction to Macroeconomics
Introduction to Economics
Multiple Choice
Which of the following is a major factor in preventing the economy from rapidly adjusting to shocks?
A
Price stickiness
B
Instantaneous wage adjustments
C
Perfect information
D
Unlimited resources
Verified step by step guidance1
Step 1: Understand the concept of economic shocks, which are unexpected events that disrupt the economy, such as sudden changes in demand or supply.
Step 2: Recognize that for the economy to adjust rapidly to shocks, prices and wages need to be flexible so that markets can clear quickly.
Step 3: Define price stickiness as the resistance of prices to change immediately in response to changes in supply or demand, which slows down the adjustment process.
Step 4: Compare price stickiness with other options like instantaneous wage adjustments, perfect information, and unlimited resources, noting that these factors would facilitate rather than prevent rapid adjustment.
Step 5: Conclude that price stickiness is a major factor preventing the economy from rapidly adjusting to shocks because it delays the necessary changes in prices that help restore equilibrium.
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