A Keynesian model that is consistent with fully flexible wages and prices is based upon the notion of
A) cooperation failures.
B) coordination failures.
C) collaboration failures.
D) decreasing returns to scale.
E) strategic complementarities.

Question

Quizplus · Accepted Answer

Coordination failures occur when economic agents fail to coordinate their actions, leading to suboptimal outcomes, even when wages and prices are flexible. This concept aligns with Keynesian models that explain persistent unemployment or underutilization of resources.

A Keynesian Model That Is Consistent with Fully Flexible Wages