Nominal rigidity, also known as price-stickiness or wage-stickiness, is a situation in which a nominal price (price not adjusted to inflation etc) is resistant to change.
- Nominal value - measured in terms of money
- Real value - measured against goods or services
If nominal wages and prices were not sticky, or perfectly flexible, they would always adjust such that there would be equilibrium in the economy. In a perfectly flexible economy, monetary shocks would lead to immediate changes in the level of nominal prices, leaving real quantities (e.g. output, employment) unaffected. This is sometimes called monetary neutrality or “the neutrality of money”.