A key component of the Keynesian model is that
A) prices are sticky.
B) prices are flexible.
C) wages are flexible.
D) people are not fooled by money illusion.

Question

Quizplus · Accepted Answer

The Keynesian model assumes that prices are sticky, meaning that they do not adjust quickly to changes in supply and demand. This leads to short-term fluctuations in output and employment, with the government's role being to stabilize the economy through fiscal and monetary policy.

A Key Component of the Keynesian Model Is That