Re: DSE 2009

Posted by Do bats eat cats? on Jun 22, 2013; 7:37pm
URL: http://discussion-forum.276.s1.nabble.com/DSE-2009-tp5282581p7582743.html

Q 18.

My macroeconomic intuition is always incorrect, but I think that the source of confusion is the rigid nominal wage.

We are told that nominal wage is rigid. So, if prices rise, real wage declines.
When real wage declines, firms hire more labour and hence produce more output. Thus, the aggregate supply is upward sloping.