Wages are considered to be sticky rather than flexible since
A)firms encounter menu costs when changing wages but not when changing prices
B)labor contracts contain cost-of-living adjustments
C)firms tend to look at labor as an expendable resource
D)firms are unsure about their competitors' behavior and only reluctantly change prices and wages following a change in aggregate demand
E)all of the above

Question

Quizplus · Accepted Answer

Wages are considered sticky because firms are often hesitant to change wages due to uncertainty about competitors' actions and the potential impact on employee morale and productivity, even when there is a change in aggregate demand.

Wages Are Considered to Be Sticky Rather Than Flexible Since