Which one of the following describes Keynesians' rationale for the positively sloped SRAS?
A) Nominal wages are fixed for the term of labour contracts, but price level changes, leading to a change in real wages and output.
B) Demand for labour increases as prices and therefore profits increase.
C) Workers prefer longer term contracts because of job security.
D) There is misperception about the relative price levels.

Question

Quizplus · Accepted Answer

Keynesians believe that nominal wages are sticky and fixed in the short run due to long-term labour contracts, leading to changes in real wages and output when there is a change in the price level. Thus, the SRAS is positively sloped.

Which One of the Following Describes Keynesians' Rationale for the Positively