Use sticky-wage theory to explain why an increase in the expected price level shifts the aggregate supply curve
When people expect the price level to increase, wage bargaining will lead to higher wages. The increase in wages raises the costs of production. So firms will supply less at any actual price level.
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The theory of purchasing power parity
A) extends the law of one price to a group of goods. B) assumes that most changes in nominal exchange rates are the result of changes in real exchange rates. C) assumes that inflation rates are roughly the same in most countries. D) was valid only under the gold standard.
The Ricardian Equivalence says
A) whatever the level of government expenses, consumption is the same. B) whatever the timing of taxes, consumption is the same. C) higher government expenses reduce consumption. D) an increase in current consumption has to lead to a decrease in future consumption.
According to Irving Fisher, velocity ________
A) is determined by institutions that affect the way individuals transact B) is affected by institutions only gradually C) is assumed constant in the short run D) all of the above E) none of the above
The American Recovery and Reinvestment Act of 2009 provided ________
A) tax cuts of $288 million and a government spending increase of $499 million B) tax cuts of $288 million and a government spending increase of $499 billion C) tax cuts of $288 billion and a government spending increase of $499 billion D) tax cuts of $288 trillion and a government spending increase of $499 trillion