Sticky wages and prices are incorporated in the AD-AS model by the:

Question

Quizplus · Accepted Answer

Sticky wages and prices are part of the short-run aggregate supply curve, which represents the relationship between the price level and real output produced in the short run when some prices, particularly wages, are sticky and do not adjust immediately to changes in the price level. The long-run aggregate supply curve represents the relationship between the price level and the potential output produced in the long run when all prices have fully adjusted. The aggregate demand curve represents the relationship between the price level and the quantity of goods and services demanded by households, firms, and the government. Therefore, choice B is the best answer.

Sticky Wages and Prices Are Incorporated in the AD-AS Model