If prices and wages are slow to adjust ("sticky," rather than flexible):
A)inflation would adjust rapidly.
B)output gaps would disappear quickly.
C)inflation would adjust to output gaps sluggishly.
D)the short-run aggregate supply curve would not shift.

Question

Quizplus · Accepted Answer

If prices and wages are sticky, then they are slow to adjust in response to changes in market conditions. This means that inflation would not adjust rapidly to changes in output gaps, as prices would not adjust quickly to changes in demand or supply. Instead, inflation would adjust sluggishly, meaning that it would take longer to reach equilibrium. This would result in a sluggish adjustment of the short-run aggregate supply curve.

If Prices and Wages Are Slow to Adjust ("Sticky," Rather