The difference between the Keynesian and new Keynesian approaches to the short-run aggregate supply curve is that
A)Keynesians assumed that the short-run aggregate supply curve was vertical or nearly vertical, while new Keynesians assume that it is nearly horizontal.
B)Keynesians focused on the difference between the actual and expected price levels, whereas new Keynesians believe this difference to be unimportant.
C)Keynesians believed that aggregate demand was more important than aggregate supply, whereas new Keynesians believe the reverse.
D)Keynesians assumed that the short-run aggregate supply curve was horizontal or nearly horizontal, whereas new Keynesians have provided economic explanations for price stickiness.

Question

Quizplus · Accepted Answer

The Keynesian and new Keynesian approaches differ in their assumptions about the shape of the short-run aggregate supply curve. Keynesians assumed it to be horizontal or nearly horizontal, while new Keynesians have provided economic explanations for price stickiness, which results in a sloping short-run aggregate supply curve. Therefore, choice D is the correct answer.

The Difference Between the Keynesian and New Keynesian Approaches to the Short-Run