If wages and other input prices are inﬂexible, then the economy will not automatically adjust to full
employment in the long run.

Question

Quizplus · Accepted Answer

If wages and other input prices are inﬂexible, then firms cannot easily adjust their costs and may not be able to increase production and employment to reach full employment levels in the long run. Without this automatic adjustment, government intervention may be necessary to boost demand and stimulate job creation.

If Wages and Other Input Prices Are Inﬂexible, Then the Economy