14. According to the theory of sticky wages:
(A) prices adjust slowly to a decrease in nominal wages. Firms face lower wages and sinceprices stay high they increase the level of produetion and thus employment. This results in higheraggregate supply.
(B) wages adjust slowly to a decrease in prices. Firms face lower prices and since the costsof production stay high they have to decrease production and thus employment. This decreasesaggregate supply.
(C) not all frms immediately adjust their prices in reaction to a decrease in the price level. Thesefirms face higher prices and thus they increase production, which increases aggregate supply.
(D) prices react more than proportionally to increases in nominal wages. Producers face higherwages, but since prices increase more than wages they want to increase production. This results inhigher aggregate supply.