If there are sticky wages, and the price level is greater than what was expected
ID: 1202269 • Letter: I
Question
If there are sticky wages, and the price level is greater than what was expected, then....
A. the quantity of aggregate goods and services supplied falls, as shown by a movement to the left along the short-run aggregate supply curve.
B. the quantity of aggregate goods and services supplied rises, as shown by a movement to the right along the short-run aggregate supply curve.
C. the quantity of aggregate goods and services supplied falls, which is shown by a shift of the short-run aggregate supply curve to the left.
D. the quantity of aggregate goods and services supplied rises, as shown by a shift of the short-run aggregate supply curve to the right.
Explanation / Answer
Answer-D- The quantity of aggregate goods and services sipplied rises, as shown by a shift of the short run aggregate supply curve to the right.
We know that sticky wages means that when workers earning don't adjust quickely to changes changes in labour market condition. Here the demand for the commodity decreases, then prices are also decreases.