How does the flexible wage differ from a sticky wage?
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If the output is above its natural rate, then according to sticky-wage theory:
Use the sticky wage theory of aggregate supply to explain what will happen to output and the price level in the long run. What role does expected price level play in the adjustment?
Prices are believed to be
A. flexible in the long-run and sticky in the short-run at some predetermined level
B. flexible in the long-run and in the short-run at some predetermined level
C. flexible in the short-run at some predetermined level and sticky in the long-run
D. sticky in the long-run and in the short-run at some predetermined level