Final answer:
Sticky wages and sticky prices cause the aggregate demand curve to be downward sloping and the short run aggregate supply curve to potentially shift, as prices and wages do not adjust quickly to changes in demand, leading to unemployment and recession.
Step-by-step explanation:
In the aggregate demand and aggregate supply model, sticky wages and sticky prices are important concepts that have distinct effects on the macroeconomy. Sticky wages in the labor market and sticky prices in the goods market play a role in explaining why aggregate demand is downward sloping, because they do not adjust quickly to changes in demand. This leads to excess supply, causing unemployment in the case of the labor market and a surplus of goods in the case of the goods market. These conditions can result in a recession.
The short run aggregate supply curve might shift due to sticky wages and prices, as they result in rigidity in the labor and goods markets. The inability of wages and prices to adjust downward in response to a decrease in demand prevents the economy from quickly returning to equilibrium. This illustrates the importance of understanding macroeconomic externalities and their deviation from desired outcomes at the micro level.