Wages

Short-Run AS- time too short for the wages to adjust to the price level.

• Workers may not be aware of changes in their real wages due to inflation and have adjusted their labor supply decisions and wage demands accordingly

Nominal wages- it is the amount of money received per day, per hour, per year
Sticky wages- the nominal wage level is set accordingly to an initial price level and it does not vary
Long-Run AS- time long enough for wages to adjust

• Flexible wage levels and price levels
• Both offset each other

Keynesian- Price Level (fixed), Wage level (fixed), Employment level (flexible), Implications (output depends on changes in employment).
Intermediate- Price Level (flexible), Wage level (fixed), Employment level (flexible), Implications (output depends on changes in price and employment level).
Classical- Price Level (flexible), Wage level (fixed), Employment level (fixed), Implications (output depends solely on the price level).

Demand-Pull Inflation Graph


Cost-Push Inflation Graph