Sticky prices cause shortterm problems from "summary" of EBOOK: Macroeconomics by Rudiger Dornbusch,Stanley Fischer,Richard Startz
Prices that do not adjust quickly to changes in supply and demand are called sticky prices. When prices are sticky, they can cause short-term problems in the economy. One reason for this is that sticky prices can lead to surpluses or shortages in markets, which can in turn lead to inefficient allocation of resources. For example, if the price of a good is sticky and does not adjust quickly to changes in demand, there may be excess supply in the market, leading to a surplus. This surplus can result in wasted resources, as producers are not able to sell all of their goods at the current price. On the other hand, if the price is too low due to sticky prices, there may be excess demand, leading to shortages and unmet consumer ne...
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