Within Keynesian Theory, how does the concept of 'sticky wages' contribute to prolonged periods of unemployment during economic downturns?
1
Sticky wages accelerate the adjustment in the labor market, reducing unemployment relatively quickly.
2
Sticky wages cause the central bank to increase interest rates sharply, leading to lower investment and higher unemployment.
3
Sticky wages prevent wages from falling quickly in response to reduced demand, keeping labor costs high and employment levels low.
4
Sticky wages lead to increased consumer spending, which reduces the duration of unemployment.
5
Sticky wages do not impact unemployment; they're solely a factor in inflationary processes.