The flexibility of wages and prices RBC theory assumes that wages and prices are completely flexible,so markets always clear. RBC proponents argue that the extent to which wages or prices may be sticky in the real world is not important for understanding economic fluctuations. They also prefer to assume flexible prices to be consistent with microeconomic theory. Critics believe that wage and price stickiness explains involuntary unemployment and the non-neutrality of money. • The flexibility of wages and prices • RBC theory assumes that wages and prices are completely flexible, so markets always clear. • RBC proponents argue that the extent to which wages or prices may be sticky in the real world is not important for understanding economic fluctuations. • They also prefer to assume flexible prices to be consistent with microeconomic theory. • Critics believe that wage and price stickiness explains involuntary unemployment and the non-neutrality of money