Question

1- What is the potential reasons for price stickiness.

2- What is the main aspect of the New Keynesian (NK) model.

3- What is the welfare costs of inflation.

Answer 1

answer 1

Price thickness means when price cannot adjust immediately to change in economic conditions are in the aggregate price level there is an inefficiency or disc equilibrium in the market.Price thickness is the resistance of market prices to change quickly despite changes in the broad economy that suggest a different price is optimal.the concept of price thickness can also applied to veggies when sales fall in a company company don't resort to cutting wages.

Cause of price stickiness

Price thickness is the the nation that there are adjustment cost associated with changing price. In some cases firms mast print new price list and catalogue and notify customers of prices changes doing this too often code jeoparadize customer relations. Form paper to adjust output and employment in response of changing market conditions living product price alone. Quantity adjustments have costs but forms mein assume that the associated risks are similar than those associated with price adjustments.