-Time too short for wages to adjust to the price level
-workers may not be aware of changes in their real wages due to inflation and having adjusted their labor supply decisions and wage demands accordingly (if you work for a company and they give you a 2% raise, it is not actually a lot)
Nominal Wages
-the amount of money received per hour/per day/per year
-we usually get Real Wages because it is adjusted for taxes, inflation, etc.
LRAS
-time long enough for wages to adjust to the price level
- Key assumptions
- represented by a vertical line
- wages and prices are flexible
- changes in wages and price offset each other
- technology and economic growth shifts LRAS
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