When _____ wages are sticky, _____ in the price level leads to a decrease in the profit earned by businesses.
A) real; a decrease
B) nominal; a decrease
C) real; an increase
D) nominal; an increase

Question

Quizplus · Accepted Answer

When nominal wages are sticky, a decrease in the price level means that the cost of labor remains relatively high while the prices at which goods and services are sold decrease. This scenario squeezes profit margins for businesses because their revenues fall while their labor costs do not adjust downward accordingly.

When _____ Wages Are Sticky, _____ in the Price Level

When _ Wages Are Sticky, _ in the Price Level