If output is above its natural rate,then according to sticky-wage theory
A)workers and firms will strike bargains for higher wages.This increase in wages shifts the short-run aggregate supply curve right.
B)workers and firms will strike bargains for higher wages.This increase in wages shifts the short-run aggregate supply curve left.
C)workers and firms will strike bargains for lower wages.This decrease in wages shifts the short-run aggregate supply curve right.
D)workers and firms will strike bargains for lower wages.This decrease in wages shifts the short-run aggregate supply curve left.

Question

Quizplus · Accepted Answer

According to sticky-wage theory, if output is above its natural rate, workers and firms will strike bargains for higher wages. However, wages are said to be "sticky" in the short-run, meaning they do not adjust immediately to changes in output or demand. As a result, higher wages will increase firms' costs of production, leading to a decrease in short-run aggregate supply. A rightward shift in the short-run aggregate supply curve would only occur if there was an increase in productivity or a decrease in input costs.

If Output Is Above Its Natural Rate,then According to Sticky-Wage