Nominal wages are assumed fixed in the short run because a. workers have wages stated in their...
Question:
Nominal wages are assumed fixed in the short run because
a. workers have wages stated in their contracts.
b. of minimum wage laws.
c. workers are unaware of short-run changes in their real wages.
d. All of the answers above are correct.
e. None of the answers above are correct.
Sticky Wages:
In Keynesian models wages are often assumed to be sticky in the short-run. This is assumed to be the cause of unemployment in a recession since wages do not fall and thus a decline in the demand for labor results in a surplus of labor.
Answer and Explanation: 1
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View this answerAnswer: D
Labor contracts sometimes specify specific fixed wages in the near future which is one reason why wages are assumed to be fixed.
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Sticky Wages and Prices: Effect on Equilibrium
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Chapter 7 / Lesson 9
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Understand what sticky wages and sticky prices are. Comprehend wage rigidity. Discover why sticky wages and prices are important in Keynesian decision-making.
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