Which one of the following describes Keynesians' rationale for the positively sloped SRAS curve?
A)Nominal wages are fixed for the term of labour contracts,but price level changes,leading to a change in real wages and output.
B)Demand for labour increases as prices increase and therefore profits increase.
C)Workers prefer longer term contracts because of job security.
D)There is misperception about the relative price levels.

Question

Quizplus · Accepted Answer

Keynesians believe that nominal wages are fixed in the short run, therefore changes in the price level will affect real wages and therefore output. As a result, the SRAS curve is positively sloped. The other options do not accurately describe the Keynesian rationale for the SRAS curve.

Which One of the Following Describes Keynesians' Rationale for the Positively