Assume an economy in the steady state. In the standard Solow framework, if there is a sudden and permanent increase in the depreciation rate of capital, which of the following is not true?

a. The steady state level of capital declines.

b. The total output of the economy declines.

c. The level of savings in the economy declines.

d. The level of total factor productivity declines.

Why is the phenomenon of sticky prices important?

a. Because it allows increases in the inflation rate to be offset by increases in the prices of goods and services.

b. Because it allows the Federal Reserve to control the Real Interest Rate by changing the Nominal Interest Rate.

c. Because it allows the government to employ fiscal policy more efficiently than monetary policy.

d. Because it reduces the slope of the Phillips curve, allowing greater policy flexibility