Which theory maintains that the money wage rate always adjusts freely?
A) Keynesian cycle theory
B) monetarist cycle theory
C) both the new classical cycle theory and the new Keynesian cycle theory
D) real business cycle theory

Question

Quizplus · Accepted Answer

Real Business Cycle Theory posits that the money wage rate adjusts freely and quickly to equilibrate labor supply and demand, thus negating the possibility of prolonged periods of unemployment due to wage rigidity. This contrasts with Keynesian views that emphasize wage and price stickiness.

Which Theory Maintains That the Money Wage Rate Always Adjusts