Which of the following correctly explains why real wages may vary in the short run?
A) Workers usually prefer inﬂexible nominal wage agreements.
B) Since wage bargaining is costless, ﬁrms and workers negotiate new wages frequently.
C) The level of inﬂation in most economies is stable.
D) In most industries, nominal wage adjustment is instantaneously linked to inﬂation.

Question

Quizplus · Accepted Answer

Workers often prefer inflexible nominal wage agreements because they provide a sense of security and predictability in their income, despite changes in the economy or inflation. This preference can lead to real wages varying in the short run as it takes time for nominal wages to adjust to changes in inflation or economic conditions.

Which of the Following Correctly Explains Why Real Wages May