When there is Keynesian unemployment in the New Keynesian model, a Pareto optimum can be reached by

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According to the New Keynesian model, when there is unemployment, the economy is in a suboptimal equilibrium. To reach a Pareto optimum, the government needs to increase demand by increasing current government spending or by increasing the money supply. This will lead to a decrease in unemployment, an increase in output, and a move towards the Pareto optimum. Decreasing government spending or the money supply can exacerbate the unemployment problem and move the economy further away from the Pareto optimum. Increasing nominal wages may not be effective in reducing unemployment in the short run, as it can lead to higher costs for firms and reduce their willingness to hire.

When There Is Keynesian Unemployment in the New Keynesian Model