Unit III: Wages and Implications

Nominal versus real vs sticky wages

-Nominal wages are the amount of money received by a worker per unit of time

-Real wage is the amount of goods and services that a worker can purchase with their nominal wages

-In essence real wages is the purchasing power of nominal wages

-Sticky wages: nominal wage level that is set according to an initial price level and does not vary due to labor, contrast, or other restrictions

		Price	Wages	Employment Level
Keynesian	Range Recession	Fixed	Fixed	Flexible
	Intermediate Range	Flexible	Fixed	Flexible
Classical	Inflation	Flexible	Flexible	Fixed

Implications

Keynesian (recession) output depends on changes in the employment level

Intermediate Range- output depends upon in rice and employment levels

Classical- output is independent of changes in the price level