In constructing the short-run Phillips Curve,SP,
A)real wages are fixed.
B)nominal wages are renegotiated.
C)nominal wages are fixed.
D)raw materials prices are fixed.

Question

Quizplus · Accepted Answer

In the short-run Phillips curve, nominal wages are fixed, which means that the prices of goods and services will adjust to changes in demand and supply, leading to changes in the level of employment and inflation. Real wages, or wages adjusted for inflation, may change in the short-run due to changes in prices, but this is not the primary determinant of the position of the Phillips curve. Raw material prices may affect production costs and output, but they are not directly related to the relationship between inflation and employment captured by the Phillips curve.

In Constructing the Short-Run Phillips Curve,SP