Because not all prices adjust instantly to changing circumstances,an unexpected fall in the price level leaves some firms with higher-than-desired prices,and these higher-than-desired prices depress sales and induce firms to reduce the quantity of goods and services they produce.

Question

Quizplus · Accepted Answer

This statement is true. It is known as the sticky prices model, where prices do not adjust immediately to changes in the economy, causing firms to have higher prices than desired, which can lead to a decrease in sales and production.

Because Not All Prices Adjust Instantly to Changing Circumstances,an Unexpected