If nominal wages are sticky, then nominal price stickiness
A) is likely to result only if there are large costs to changing prices.
B) is likely to result even if firms set prices at the exact optimum.
C) is likely to occur only in those cases where firms have limited incentives to set the optimal price.
D) is likely to occur even in the case of precious metals.
E) prevails in all products.

Question

Quizplus · Accepted Answer

Nominal price stickiness is likely to result even if firms set prices at the exact optimum because nominal wages are sticky. This is because firms may be reluctant to change prices even if it would be optimal to do so, in order to avoid the costs of changing prices.

If Nominal Wages Are Sticky, Then Nominal Price Stickiness