What do economists mean by the term "sticky wage"?
A) It refers to the reluctance by employers to decrease nominal wages during an inflationary period.
B) It refers to a wage that is slow to adjust to its equilibrium level, creating sustained periods of shortage or surplus in the labor market.
C) It refers to a breakdown in wage negotiations between employers and employee unions.
D) It refers to a union negotiated wage.

Question

Quizplus · Accepted Answer

A sticky wage is a wage that is slow to adjust to its equilibrium level, creating sustained periods of shortage or surplus in the labor market. This is because of factors such as labor market institutions, minimum wage laws, and social norms that make it difficult for wages to immediately adjust to changes in supply and demand.

What Do Economists Mean by the Term "Sticky Wage