Answer the following statements true (T) or false (F)

1. If expectations are always met, then firms would never contribute to any of the short-run fluctuations in employment and output that are observed in real-world economies
2. If the prices of goods and services were flexible, then the economy could always produce at its optimal capacity.
3. An unexpected negative demand shock would lead to a decrease in inventories
4. An unexpected negative demand shock would lead to a decrease in real GDP.
5. Sticky prices could be the result of firms being afraid of price wars.


1. TRUE
2. TRUE
3. FALSE
4. TRUE
5. TRUE

Economics

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