Principles of Macroeconomics / Unit 10 MAC 0902 short lesson, about 20 seconds
Wages and Prices Are Flexible Over Time
Captions available
The idea
The second building block answers unit nine directly. Wages and prices are sticky in the short run but flexible over longer periods, so the economy returns to potential on its own.
In practice
The stickiness that traps output below potential for a year wears off over several.
Where people slip
Unit nine denied this. The disagreement is about how long, not whether.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
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