Business Cycle Theory

Business Cycle Theory The Sticky- pay Model In this model, economists dismount out the sluggish adjustment of nominal wages pathway to exempt why it is that the short-run conflate ply slip is upwardly sloping. For sticky nominal wages, an increase in the ruin take lowers the real wage therefore making childbed cheaper for firms. Cheaper promote means that firms will hire more labor, and the increase labor will in turn produce more output. The clock period where the nominal wage cannot adjust to the changes in price level and output signifies the positive sloping aggregate supply curve. The nominal wage is set by the workers and the firms base on the target real wage, which may or may not be the labor supply & guide equilibrium, and on price level expectation. W = ù * Pe Nominal Wage = target Real Wage * Expected Price aim after(prenominal) the nominal wage has been set but before both(prenominal) hiring, firms learn the actual price level (P). From this the real wa...If you arrogance to get a full essay, order it on our website: OrderEssay.net

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