Keynesian economists oppose wage cutting when unemployment rises because:
A) They believe it would be unfair to workers
B) Wage cutting reduces workers' income which will cause a decline in spending and unemployment
C) Wage cutting will decrease profits and reduce investment incentives
D) All of the above

Question

Quizplus · Accepted Answer

Keynesian economists believe that wage cutting during times of high unemployment will lead to a decrease in workers' incomes, which will in turn cause a decline in spending and further unemployment. This is known as the "paradox of thrift." Therefore, they oppose wage cutting as a solution to unemployment.

Keynesian Economists Oppose Wage Cutting When Unemployment Rises Because