According to Keynes
A)the short-run aggregate supply curve is vertical.
B)nominal wages and/or prices are sticky.
C)money illusion does not exist.
D)markets are perfectly competitive.

Question

Quizplus · Accepted Answer

According to Keynes, nominal wages and/or prices are sticky in the short run, meaning that they do not adjust immediately to changes in demand or supply. This leads to a horizontal short-run aggregate supply curve. Option A is incorrect, as the short-run aggregate supply curve is horizontal, not vertical, according to Keynes. Option C is also incorrect as Keynes believed that money illusion exists, whereas option D is incorrect as Keynes did not assume markets to be perfectly competitive.