The correct option for nominal wages when employers are reluctant to decrease nominal wages during economic downturns and increase nominal wages during economic expansions.
Answer to Problem 5MCQ
From the available options, the correct option is sticky.
Explanation of Solution
When employers are not willing to decrease the nominal wages at the time of economic downturns and also not willing to increase the wages during economic expansions, then the nominal wages would be sticky because economic recession or slowdown and increase in the level of economic activity do not affect the wages of workers. Therefore, in this situation nominal wages are not flexible and unyielding as employers do not change the wage rate according to economic activity. As these wages are not flexible therefore the wages cannot be considered in long-run. And real wage change with the inflation or economic level therefore, it cannot be real wage.
Here, the correct option is e (sticky).
Introduction: Nominal wage refers to monetary wage which is paid by the employer or organization to worker per hour basis or by salary.
Chapter 18 Solutions
Krugman's Economics For The Ap® Course
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education