As wages and prices become more sticky ________.
A)the short-run Phillips curve gets flatter
B)wages become less responsive to unemployment deviations from the natural rate
C)it becomes easier to differentiate the short-run from the long-run Phillips curve
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

When wages and prices become more sticky, the short-run Phillips curve gets flatter because wages and prices do not adjust quickly to changes in unemployment. This also means wages become less responsive to unemployment deviations from the natural rate. Additionally, it becomes easier to differentiate the short-run from the long-run Phillips curve, as the long-run curve is vertical (indicating no trade-off between inflation and unemployment) while the short-run curve shows a trade-off that is more pronounced when wages and prices are flexible.

As Wages and Prices Become More Sticky ________