In the Keynesian model, prices and nominal wages are _____. Because of this, the SRAS curve is upward sloping and, as a result, an increase in the MS leads to _____ in the aggregate PL.
a. flexible; an equal proportional decrease
b. sticky; an equal proportional increase
c. sticky; a less than proportional decrease
d. flexible; an equal proportional increase
e. sticky; a less than proportional increase
Aggregate Demand (AD) and Aggregate Supply (AS):
The AD and AS models determine the price level and the level of output in an economy. AD refers to the total demand for commodities and services that are produced in an economy during a given period. It is the sum of consumption, investment, government expenditure, and net exports. AS refers to the total output produced in an economy.
Answer and Explanation: 1
The Keynesian model states how aggregate demand and aggregate supply affect the level of output and the price level in the economy. Changes in...
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fromChapter 3 / Lesson 40
Explore the Keynesian economic theory. Learn the definition of Keynesian economics, discover its history, and understand how it works with interesting examples.