Wage contracts are often set for periods of up to three years.As a result,fluctuations in aggregate demand and aggregate supply tend to

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Wage contracts set for fixed periods can lead to changes in the amount of involuntary unemployment because they prevent wages from adjusting quickly to changes in aggregate demand and aggregate supply. This can result in mismatches between labor supply and demand, leading to more involuntary unemployment when the economy slows down and less when it speeds up, but wages cannot adjust immediately due to the fixed contracts.

Wage Contracts Are Often Set for Periods of Up to Three