firms' costs associated with changing their prices when workers respond, not to the purchasing power of their wage, but to the face value of their wage or salary an event that changes the existing productivity and therefore changes the extent to which economic growth occurs given flexible prices and the existing factors of production, a measure of how much the economy grows variations in the growth rate from the long-run rate of economic growth Answer Bank natural rate of unemployment transaction cost Solow growth rate real shock business fluctuations menu cost nominal wage confusion purchasing power discrepancies