(Answered) Since the nominal wage is deemed​ inflexible, a decrease in aggregate demand causes firms…

➤ Can monetary or fiscal policy counteract unemployment caused by sticky wages?
Yes. Expansionary fiscal policy, like increased government spending or tax cuts, raises aggregate demand and encourages hiring despite sticky wages. Monetary policy lowers interest rates to stimulate spending, though it can be limited in a liquidity trap. Timely policy can restore demand and reduce unemployment faster than waiting for wage changes.