One reason NOT to wait for wage rates and other input prices to fall and shift the short-run aggregate supply curve to the right in an economy experiencing a recessionary gap is that
A) such action will result in inflation.
B) unemployment would fall too fast for a complete adjustment.
C) a government budget deficit would be created.
D) it would take too long because wages and prices tend to be sticky.
E) falling prices would reduce exports.

Question

Quizplus · Accepted Answer

Waiting for wage rates and input prices to fall can take too long because prices and wages tend to be sticky in the short run, meaning they don't adjust quickly to changes in market conditions. This delay can prolong the recessionary gap, leading to long-term unemployment and other economic problems.

One Reason NOT to Wait for Wage Rates and Other