What does it mean to characterize prices as sticky? O O That prices do not chang

Question

What does it mean to characterize prices as sticky? O O That prices do not change very easily. That the aggregate price level tends to fluctuate wildly That prices change frequently and there are few barriers to price movements That the aggregate price level is fixed. That it is very difficult for policy makers to manipulate the aggregate O price level. Which of the following is a source of sticky wages? O O The existence of monetary policy. The existence of labor contracts The fact that policy makers don't directly control all components of aggregate demand The fact that firms determine the price of their output without government involvement.

Explanation / Answer

Answer.)

Q1.) That prices do not change very easily.

Sticky prices means that nominal prices of goods do not react rapidly to changing circumstances, such as increased wages, increased money supply, or changes in inflation.

Q2.) The existence of labor contracts.

Some of the prime reasons of sticky wages are;-

1.) Minimum wage laws

2.) unions

3.) labor contracts

4.) efficiency wages.

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