An important New Keynesian explanation for the existence of involuntary unemployment is that labour markets exhibit

Question

Quizplus · Accepted Answer

In New Keynesian economics, the existence of involuntary unemployment is often attributed to the phenomenon of sticky wages. This means that in the short run, wages are not completely flexible and do not adjust immediately to changes in supply and demand conditions in the labour market. Therefore, even if there is excess labour supply, the wage rate may not adjust downwards to clear the market, resulting in involuntary unemployment.

An Important New Keynesian Explanation for the Existence of Involuntary