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Macroeconomics

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Aggregate Supply Shape Sticky Prices

MACRO-LW1WDM

Which of the following descriptions best describes the short run aggregate supply when all goods prices are perfectly sticky (but nominal wages are flexible)?

A

The short run aggregate supply curve is perfectly horizontal.

B

The short run aggregate supply curve is positively sloped.

C

The short run aggregate supply curve is perfectly vertical.

D

The short run aggregate supply curve is negatively sloped.

E

None of the above are correct.