Suppose the price level falls but because of fixed nominal wage contracts the real wage rises and firms cut back on production This is a demonstration of the ?

A. sticky-wage theory of the short-run aggregate supply curve
B. classical dichotomy theory of the short-run aggregate supply curve
C. misperceptions theory of the short-run aggregate supply curve
D. sticky-price theory of the short run aggregate supply curve

Correct Answer: sticky-wage theory of the short-run aggregate supply curve ✔

Last Updated: June 18, 2019