The consumption decisions of individuals are not important for the:
A) determination of the steady-state capital stock.
B) determination of fiscal-policy multipliers.
C) determination of aggregate demand.
D) determination of sticky prices.

Question

Quizplus · Accepted Answer

Sticky prices refer to prices that do not immediately change in response to changes in supply and demand. The consumption decisions of individuals do not directly affect the stickiness of prices, so they are not important for the determination of sticky prices. However, the consumption decisions of individuals do impact aggregate demand, so C is incorrect. The determination of the steady-state capital stock and fiscal-policy multipliers are also affected by consumption decisions, so A and B are incorrect.

The Consumption Decisions of Individuals Are Not Important for The