Because prices are sticky, a positive demand shock will lead to
A) no change in unemployment.
B) an increase in unemployment.
C) a decrease in unemployment.
D) an unpredictable change in unemployment.

Question

Quizplus · Accepted Answer

When prices are sticky, a positive demand shock means that demand for goods and services increases faster than prices can adjust. This leads to higher production to meet the increased demand, which typically requires more labor, thus decreasing unemployment.

Because Prices Are Sticky, a Positive Demand Shock Will Lead