Which of the following helps to explain how unexpected changes in demand lead to fluctuations in GDP and employment?

Multiple choice question.

future prices

flexible prices

input prices

consumer prices

sticky prices

1 answer

The correct answer is sticky prices.

Sticky prices refer to the phenomenon where prices do not adjust quickly to changes in supply and demand. This can lead to unexpected changes in demand resulting in fluctuations in GDP and employment, as firms may be unable to adjust their prices downward or upward quickly in response to market conditions, causing temporary imbalances in the economy.