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Question: Suppose you are CEO of a manufacturing company, and oil prices suddenly double, which boosts the inflation rate by 5%. While your principal job is to keep quarterly earnings rising, you are concerned that a recession might occur, and failing to maintain market share could be very costly in the longer run. Explain what steps you would take under the assumptions that:

(A) Both wages and prices are flexible.

(B) Prices can change quickly, but wages will respond only with a substantial lag.

(C) Both prices and wages are sticky.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M93114962

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