Whats a reason why wages are more flexible in the long run than in the short run?

Question

Which of the following is one of the reasons why wages are more flexible in the long run than in the short run?

a. Government regulations

b. Rent controls

c. Quite the opposite, wages are actually more flexible in the short run

d. Because workers cannot make short-term decisions

e. Because of long-term contracts

Assume the AD curve is held constant and short-run aggregate supply decreases. The result is

a. an increase in both equilibrium real GDP and the price level.

b. a decrease in equilibrium real GDP, while the price level remains fixed.

c. a decrease in both equilibrium real GDP and the price level.

d. a decrease in equilibrium real GDP and an increase in the price level.

e. an increase in the price level, while equilibrium real GDP remains fixed.

Answer 1

Which of the following is one of the reasons why wages are more flexible in the long run than in the short run?

e. Because of long-term contracts

(in major industries, trade unions enter into 3 to 5 year wage contracts, also in the shortrun, the labor supply and demand  balance does not change drastically

Assume the AD curve is held constant and short-run aggregate supply decreases. The result is

d. a decrease in equilibrium real GDP and an increase in the price level.