In the Keynesian model of aggregate expenditure, we assume that firms will
A) not change prices.
B) change prices only when inventory levels rise.
C) raise prices when inventory levels fall.
D) change prices immediately after a fluctuation in aggregate demand, to maintain profits.

Question

Quizplus · Accepted Answer

In the Keynesian model, it is assumed that firms do not change prices in response to changes in demand; instead, they adjust production levels to meet the aggregate demand. This is based on the idea of price stickiness in the short run.

In the Keynesian Model of Aggregate Expenditure, We Assume That