Which of the following perspectives believes that both wages and prices are stuck in the immediate short run and that prices are inflexible downward but flexible upward?
A) Monetarism.
B) Mainstream economists.
C) Rational expectations economists.
D) None of these-they all see wages and prices as flexible.

Question

Quizplus · Accepted Answer

Mainstream economists believe in the sticky wages and prices theory, which means that both wages and prices are stuck in the immediate short run and that prices are inflexible downward but flexible upward. Monetarists also believe that wages and prices are sticky, but they emphasize the role of money supply in determining the level of output and inflation. Rational expectations economists believe that wages and prices adjust quickly to changes in the economy, based on their expectations of future economic conditions. Therefore, they do not support the sticky wages and prices theory.

Which of the Following Perspectives Believes That Both Wages and Prices