Apply the concepts of menu costs and staggered price setting to the labor market
What will be an ideal response?
Wages are likely to be sticky, if it is costly for employers to monitor changes in the labor market, and if frequent wage adjustments have adverse effects on employee behavior. Since workers do not change jobs frequently in pursuit of the highest wage, there is little if any short-term penalty for wage persistence, nor reward for prompt wage adjustment. Even when it seems clear that wage adjustments are warranted, employers might hesitate to raise their labor costs above their competitors', or to lose employees by cutting wages before competitors do so.
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According to Keynes, the primary determinant of a person's saving is
A) the nominal interest rate. B) the real interest rate. C) the level of the person's consumption spending. D) the level of the person's real current income.
Utility is:
A. useful in quantitatively describing a person's preferences for one good over another. B. useful in comparing the relative satisfaction different consumers get from a particular good. C. an interesting concept, but not really useful for anything. D. useful in predicting when to put an item on sale.
If income increases by $450, we know that the change in
A. consumption, saving, and imports is greater than $450. B. consumption and saving is greater than $450. C. consumption, saving, imports, and exports is less than $450. D. consumption, saving, and imports equals $450.
When oil and energy prices rise, the economy tends to experience:
A. Natural inflation B. Demand-pull inflation C. Cost-push inflation D. Unanticipated inflation