Wage contracts fix nominal wages for the life of the contract. sticky; they are slow to produce equilibri-um in the market for w orkers. C) they confuse the signal system that brings together consumers and producers. Because the wage rate is stuck at W, above the equilibrium, the number of job seekers (Qs) is greater than the number of job openings (Qd). Price Stickiness is the resistance of a price (or set of prices) to change, despite changes in the broad economy that suggest a different price is optimal. I've always wondered what makes materials like glue and tape sticky on a molecular level. In the real world it is often difficult to achieve coordination since the number of firms setting prices is large. The high price in the final good motivates them to produce even more. Price stickiness (or sticky prices) is the resistance of market price (s) to change quickly despite changes in the broad economy that suggest a different price is … Also, cost-of-living or other contingencies add complexity to contracts that both sides may Learn vocabulary, terms, and more with flashcards, games, and other study tools. Whether your child has put stickers on the wall or you need to remove the sticky price tag on a gift. In 2004, economists Mark Bils and Peter Klenow looked at how businesses changed prices, and found that the changes were too frequent to be consistent with the sticky-price story. It is then passed to the intestines, along with bile, where they are acted upon by bacteria. To Intervene or Not to Intervene: An Introduction to the Controversy, Case in Point: Survey of Economists Reveals Little Consensus on Macroeconomic Policy Issues, The Rule of 72 and Differences in Growth Rates, Case in Point: Presidents and Economic Growth, Growth and The Long-Run Aggregate Supply Curve, The Aggregate Production Function, the Market for Labor, and Long-Run Aggregate Supply, Case in Point: Technological Change, Employment, and Real Wages During the Industrial Revolution, Explaining Recent Disparities in Growth Rates, Case in Point: Economic Growth in Poor Countries … or Lack Thereof, Bank Finance and a Fractional Reserve System, The Discount Window and Other Credit Facilities, Case in Point: Fed Supports the Financial System by Creating New Credit Facilities, The Bond Market and Macroeconomic Performance, Exchange Rates and Macroeconomic Performance, Demand, Supply, and Equilibrium in The Mong Market, The Full Employment and Balanced Growth Act of 1978, Monetary Policy and Macroeconomic Variables, Case in Point: A Brief History of the Greenspan Fed, Problems and Controversies of Monetary Policy, Price Level or Expected Changes in the Price Level, Monetary Policy and The Equation of Exchange, Money, Nominal GDP, and Price-Level Changes, Why the Quantity Theory of Money Is Less Useful in Analyzing the Short Run, Case in Point: Velocity and the Confederacy, The Use of Fiscal Policy to Stabilize The Economy, Case in Point: Post–World War II Experiences with Fiscal Policy in the United States, Consumption and the Aggregate Expenditures Model, Consumption and Disposable Personal Income, Case in Point: Consumption and the Tax Rebate of 2001, The Aggregate Expenditures Model: A Simplified View, Autonomous and Induced Aggregate Expenditures, Equilibrium in the Aggregate Expenditures Model, Changes in Aggregate Expenditures: The Multiplier, The Aggregate Expenditures Model in a More Realistic Economy, Taxes and the Aggregate Expenditure Function, The Addition of Government Purchases and Net Exports, Case in Point: Fiscal Policy in the Kennedy Administration, Aggregate Expenditures and Aggregate Demand, Aggregate Expenditures Curves and Price Levels, The Multiplier and Changes in Aggregate Demand, Case in Point: Predicting the Impact of Alternative Fiscal Policies in 2008, Case in Point: The Reduction of Private Capital in the Depression, Case in Point: Assessing the Impact of a One-Year Tax Break on Investment, Case in Point: Investment by Businesses Saves the Australian Expansion, The International Sector: An Introduction, The Rising Importance of International Trade, Case in Point: Canadian Net Exports Survive the Loonie’s Rise, Case in Point: Alan Greenspan on the U.S. Current Account Deficit, Fixed Exchange Rates Through Intervention, Case in Point: Some Reflections on the 1970s, Explaining Inflation–Unemployment Relationships, The Phillips Phase: Increasing Aggregate Demand, Changes in Expectations and the Stagflation Phase, Case in Point: From the Challenging 1970s to the Calm 1990s, Inflation and Unemployment in The Long Run, Cyclical Unemployment and Efficiency Wages, Case in Point: Altering the Incentives for Unemployment Insurance Claimants, A Brief History of Macroeconomic Thought and Policy, The Great Depression and Keynesian Economics, The Classical School and the Great Depression, Keynesian Economics and the Great Depression, Keynesian Economics in The 1960s and 1970s, Expansionary Policy and an Inflationary Gap, Macroeconomic Policy: Coping with the Supply Side, New Classical Economics: A Focus on Aggregate Supply, An Emerging Consensus: Macroeconomics for The Twenty-First Century, The 1980s and Beyond: Advances in Macroeconomic Policy, The New Classical School and Responses to Policy, Case in Point: Steering on a Difficult Course, The Nature and Challege of Economic Development. 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