1. Using the sticky-price model, the higher the average rate of inflation, the more frequently firms must adjust their prices, which implies that a high rate of inflation:
A) has no effect on the slope of the short-run aggregate supply curve.
B) should make the short-run aggregate supply curve flatter.
C) makes the short-run aggregate supply curve steeper.
D) causes prices to be sticky.
2. Starting from long-run equilibrium in the dynamic model of aggregate demand and aggregae supply, a one-period positive supply shock causes output to:
A) remain above the natural level for only one period.
B) remain above the natural level for more than one period.
C) remain below the natural level for only one period.
D) remain below the natural level for more than one period.