Full Employment
Equilibrium exists where AD intersects SRAS & LRAS same point.
• a recessionary gap exists when equilibrium occurs below full employment product.
Inflationary Gap
Inflationary Gap
• an inflationary gap exists when equilibrium occurs beyond full employment output.
Nominal Wages v. Real Wages (& Sticky Wages)
Nominal wages: the amount of money reviews by a worker per unit of time. (Hour, day)
Real wages: the amount of goods and services a worker can purchase with their nominal wage... (Purchasing power of your nominal wage)
Sticky wages: nominal wage level, that is set according to an initial price level. ( does not vary due to labor contacts and other restrictions)
Recessionary Gap
Inflationary Gap
Inflationary Gap
• an inflationary gap exists when equilibrium occurs beyond full employment output.
Nominal Wages v. Real Wages (& Sticky Wages)
Nominal wages: the amount of money reviews by a worker per unit of time. (Hour, day)
Real wages: the amount of goods and services a worker can purchase with their nominal wage... (Purchasing power of your nominal wage)
Sticky wages: nominal wage level, that is set according to an initial price level. ( does not vary due to labor contacts and other restrictions)
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