Question

1. Do you think prices tend to be sticky?

2. What do economists mean when they say tha participants in the economy choose between present and future consumption?

3. Why are uncertainty, expectations, and shocks important in economic system?

Answer 1

1. Price stickiness means the tendency of price to remain constant even if cost of production is changing. No, prices do not tend to be sticky until fixed by Government.
2. Participants have limited resources and limited income which they have to distribute between the present and future consumption. If they consume more in present, little will be saved for future but if they save more, they can consume more in future.
3. uncertainty, expectations, and shocks are important in the economic system, especially for the business cycle. This is important for innovation in product and policy to fight these problems. These are important to check the economy from growing too fast and focus on GDP distribution also.