In an interview with the Wall Street Journal, Federal Reserve Bank of San Francisco President Mary Daly referred to “downward nominal wage rigidities, which kept wage growth from . . . being negative during the Great Recession, because employers don’t like to cut nominal wages.”

a. What does Daly mean by “nominal wage rigidities”?

b. Why might we have expected wages to fall during the Great Recession?

c. Why don’t employers like to cut nominal wages during a recession? Wouldn’t doing so help reduce their losses from declining sales?

d. Is it possible that real wages declined at some firms during the Great Recession even if these firms didn’t cut the nominal wages they paid workers?