Keynesians disagree with the new classical model because

Question

Quizplus · Accepted Answer

Keynesians believe that wages are often negotiated through contracts rather than set by auction markets, which contradicts the assumption of flexible wages in the new classical model. Keynesians also generally believe that people are not always rational and form expectations based on factors other than pure data or logic. The statement "people do not form expectations" is not entirely accurate, as both the new classical and Keynesian models include expectations as a key component. Therefore, the correct answer is B.

Keynesians Disagree with the New Classical Model Because