Let6 - Let's summarize the chain of events that leads from an increase in the price level to an increase in output in the worker-misperception

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Unformatted text preview: Let's summarize the chain of events that leads from an increase in the price level to an increase in output in the worker-misperception model. When the price level rises, firms increase nominal wages. When nominal wages increase, workers--due to misperceptions--believe that real wages also increase. When workers believe that real wages increase, workers provide more labor. When workers provide more labor, output increases. Imperfect-Information Model The imperfect-information model of the upward sloping short- run aggregate supply curve is again based on the labor market. In this model, unlike either the sticky-wage model or the worker-misperception model , neither the worker nor the firm has complete information. That is, neither is better informed than the other is about the real wage, the nominal wage, or the price level. In this model, producers are considered to be really only aware of the price of the goods...
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This note was uploaded on 12/13/2011 for the course ECO 1310 taught by Professor Staff during the Fall '10 term at Texas State.

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Let6 - Let's summarize the chain of events that leads from an increase in the price level to an increase in output in the worker-misperception

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