Which of the following schools of thought reject the simple fixed-price model in favor of a model in which the aggregate supply curve is relatively flat at low levels of real GDP and slopes upward as real GDP approaches its potential level?
A) The new Keynesian
B) The monetarist
C) The traditional classical
D) The new classical
E) The Marxist

Question

Quizplus · Accepted Answer

The school of thought that rejects the simple fixed-price model in favor of a relatively flat aggregate supply curve at low levels of real GDP and an upward-sloping curve as real GDP approaches its potential level is the new Keynesian school of thought. This theory proposes that nominal wages are sticky and that there are price rigidities in the short run, leading to a flat aggregate supply curve at low levels of GDP. As the economy approaches its potential level, aggregate supply becomes more price elastic due to the ability of firms to adjust prices more easily.

Which of the Following Schools of Thought Reject the Simple