The cost to firms of changing prices A) is called a menu cost. ...

[lb_gilbert]

The cost to firms of changing prices
 
  A) is called a menu cost.
  B) is small even when there is rapid inflation.
  C) does not exist if inflation is perfectly anticipated.
  D) all of the above

Question 2

Refer to Figure 27-1. Suppose the economy is in short-run equilibrium above potential GDP and wages and prices are rising.
 
  If contractionary policy is used to move the economy back to long run equilibrium, this would be depicted as a movement from ________ using the static AD-AS model in the figure above.
  A) B to A B) A to E C) C to B D) E to A E) D to C

[debra928]

Answer to Question 1

A

Answer to Question 2

C

[lb_gilbert]

TYSM

[sultana.d]

Excellent