Keynesian business cycle theory cannot account for the procyclical behaviour of
A)employment,money,inflation,and labour productivity with the labour hoarding assumption.
B)unemployment,money,inflation,and labour productivity with the labour hoarding assumption.
C)employment,money,real interest rates,and real wages with sticky wages.
D)unemployment,money,inflation,and real wages.

Question

Quizplus · Accepted Answer

Keynesian theory assumes that firms will hoard labor during downturns, leading to a countercyclical behavior in employment. However, empirical evidence suggests that employment, money, inflation, and labor productivity all exhibit procyclical behavior. Keynesian theory cannot account for this with the assumption of labor hoarding.

Keynesian Business Cycle Theory Cannot Account for the Procyclical Behaviour