Question

1. Which of the following statements is true? Sticky wages are caused by contracts that keep...

1. Which of the following statements is true?

Sticky wages are caused by contracts that keep wages fixed between businesses and their suppliers, while sticky prices are caused by contracts that keep prices fixed between businesses and workers.
Sticky wages are caused by contracts that keep prices fixed between businesses and the government, while sticky prices are caused by contracts that keep wages fixed between businesses and their foreign suppliers.
Sticky prices are caused by contracts that keep wages fixed between businesses and workers, while sticky wages are caused by contracts that keep prices fixed between businesses and their suppliers.

Sticky wages are caused by contracts that keep wages fixed between businesses and workers, while sticky prices are caused by contracts that keep prices fixed between businesses and their suppliers.

2. Sticky wages and sticky prices explain the sloped short-run aggregate supply curve because:

as the prices of a firm’s products rise, they are willing to supply more if their input costs are not rising at the same time.
higher prices are an advantage to suppliers, even if their costs increase.
the price level always increases when more is supplied.

people want to buy more as the price rises, because they are afraid of future price increases.

3. Sticky wages or sticky prices don't affect the long-run aggregate supply curve because:

minimum wage sets the long-run wages.
consumers tend to buy the same quantities over the long-run.
wages and prices are renegotiated so that prices and wages are only sticky in the short-run, not in the long-run.
the price level is constant in the long-run.
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Answer #1

Question 1: sticky wages are caused by contracts that keep wages fixed between businesses and workers, while sticky prices are caused by contracts that keep prices fixed between businesses and their suppliers.

Question 2: as the prices of a firm's products rise, they are willing to supply more if their input costs are not rising at the same time.

Question 3: wages and prices are renegotiated so that prices and wages are only sticky in the short run, not in the long run.

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