For example, the sticky-wage theory asserts that output prices adjust more quickly to changes in the price level than wages, in part because of long-term wage contracts. suppose a firm signs a contract agreeing to pay its workers $15 per hour for the next year, based on an expected price level of 100. if the actual price level turns out to be 110, the firm's output prices will , and the wages the firm pays its workers will remain fixed at the contracted level. the firm will respond to the unexpected increase in the price level by the quantity of output it supplies. if many firms face similarly rigid wage contracts, the unexpected increase in the price level causes the quantity of output supplied to correct the natural level of output in the short run.

Explanation:

The sticky wage theory is based on the fact that everyone's wages tend to change more slowly than other changes in the economy. This question uses the example of inflation, but the sticky wage theory also applies for unemployment rate. If unemployment rate increases, the wages of currently employed individuals will not decrease, they might even increase a little bit. This is true even for CEOs, remember when the CEOs of General Motors and Chrysler still earned tens of millions of dollars while their companies went bankrupt?

whole quiz

1. the sum of all activities involved in getting high-quality products into the marketplace

2.operations

3. the principle of looking at the supply chain as a whole in order to improve the overall flow through the system.

4. produced; performed

5. activities producing tangible products, such as radios, newspapers, buses, and textbooks.

6. activities producing intangible and tangible products, such as entertainment, transportation, and education.

7.   customer focus

8. analyzing a competitor's products to identify desirable improvements

9. the systematic direction and control of the processes that transform resources into finished projects that create value for and provide benefits to consumers.

10. operation management.

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