The Keynesian revolution was based on the assumption of price and wage ________ and thus the need for an activist ________ policy.
A)flexibility,monetary
B)flexibility,fiscal
C)stickiness,monetary
D)stickiness,fiscal

Question

Quizplus · Accepted Answer

The Keynesian revolution was based on the assumption of price and wage stickiness (meaning they don't adjust quickly), which would make it difficult for the economy to self-correct during times of recession. Therefore, the need for an activist fiscal policy (government spending and taxation) to stimulate the economy was emphasized.

The Keynesian Revolution Was Based on the Assumption of Price