Question

Which one of the following statements is the MOST accurate?

A) There is a lively academic debate over the possibility that seemingly sticky wages and prices are in reality quite fixed.
B) There is a lively academic debate over the possibility that seemingly sticky wages and prices are in reality much more sticky than theory assumes.
C) There is a lively academic debate over the possibility that seemingly sticky wages and prices are in reality quite flexible.
D) There is no debate over the possibility that wages and prices are sticky in the long run.
E) There is no debate over the possibility that wages and prices are sticky in the short run.

Answer 1

The most accurate statement is B) There is a lively academic debate over the possibility that seemingly sticky wages and prices are in reality much more sticky than theory assumes.

Step-by-step explanation:

The most accurate statement is B) There is a lively academic debate over the possibility that seemingly sticky wages and prices are in reality much more sticky than theory assumes.

Sticky wages and prices refer to the idea that they do not adjust easily to changes in supply and demand. In the context of the question, this refers to the argument that wages and prices are even stickier than the traditional economic theories assume.

This debate among economists focuses on the extent to which wages and prices can adjust in response to changing economic conditions. Some argue that wages and prices are more flexible, while others argue that they are more sticky in the face of economic shocks.

Answer 2

The statement that there is a debate over how sticky wages and prices might be is the most accurate, reflecting current economic research and implications for unemployment.

Step-by-step explanation:

The most accurate statement regarding the debate about wage and price flexibility is B) There is a lively academic debate over the possibility that seemingly sticky wages and prices are in reality much more sticky than theory assumes. This reflects the ongoing research and controversy among economists on the subject. Although these wages and prices appear to be sticky, or slow to adjust, the debate is about whether they are even more inflexible than many economic theories suggest. Wages that do not decline easily can lead to short-run or long-run unemployment, a serious issue for both the labor market and the overall economy, as demonstrated by various figures illustrating labor and goods markets' responses to shifting aggregate demand.