Keynes believed that wages and prices were sticky. Therefore, a rightward shift of the
Aggregate demand curve would cause

Question

Quizplus · Accepted Answer

Keynes believed that in the short run, wages and prices remain fixed, so a rightward shift of the aggregate demand curve would increase the level of employment, production, and income, rather than causing a decrease in income or an increase in unemployment. A change in the long-run aggregate supply curve is also unlikely in the short run, as it reflects changes in potential output based on factors such as technology, labor force, and capital stock, which usually take time to adjust.

Keynes Believed That Wages and Prices Were Sticky