If wages and prices in long-term contracts were fully indexed,
A)prices would be more sticky in the short run.
B)prices would be more sticky in the long run.
C)prices would be less sticky in the short run.
D)the stickiness of prices would not be affected.

Question

Quizplus · Accepted Answer

Indexation of wages and prices in long-term contracts to inflation or other economic indicators makes them adjust automatically to changes in the economic environment, reducing their stickiness in the short run because they can adapt more quickly to economic conditions.

If Wages and Prices in Long-Term Contracts Were Fully Indexed