Many economists believe that some wages and prices are 'sticky downwards', meaning that these wages and...
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Many economists believe that some wages and prices are 'sticky downwards', meaning that these wages and prices increase quickly when demand is increasing but decrease slowly, if at all when demand is decreasing. Discuss the consequences of this for the automatic mechanism that brings the economy back to potential GDP after a decrease in aggregate demand. (6 marks) **** ****** Many economists believe that some wages and prices are 'sticky downwards', meaning that these wages and prices increase quickly when demand is increasing but decrease slowly, if at all when demand is decreasing. Discuss the consequences of this for the automatic mechanism that brings the economy back to potential GDP after a decrease in aggregate demand. (6 marks) **** ******
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When economists refer to wages and prices as being sticky downwards they mean that these factors tend to adjust more slowly in response to a decrease ... View the full answer
Related Book For
Macroeconomics Principles, Applications, and Tools
ISBN: 978-0132555234
7th Edition
Authors: Arthur O Sullivan, Steven M. Sheffrin, Stephen J. Perez
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