Consider the following short run aggregate supply equation: Y= $ \hat{\mathrm{Y}} $+ b (P - P^e), where Y is the real output, $ \hat{\mathrm{Y}} $ is the full employment output, P and P^eare the actual and expected price levels, respectively^. Which of the following is correct? A) In the Keynesian model, b is positive because of the sticky wage assumption. B) In the Keynesian model, b is zero because of the sticky wage assumption. C) In the classical model, b is zero because of the price misperception assumption. D) Both A and C are correct.

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The Answer of Consider the following short run aggregate supply equation: Y= $ \hat{\mathrm{Y}} $+ b (P - P^e), where Y is the real output, $ \hat{\mathrm{Y}} $ is the full employment output, P and P^eare the actual and expected price levels, respectively^. Which of the following is correct? A) In the Keynesian model, b is positive because of the sticky wage assumption. B) In the Keynesian model, b is zero because of the sticky wage assumption. C) In the classical model, b is zero because of the price misperception assumption. D) Both A and C are correct.

Consider the Following Short Run Aggregate Supply Equation: Y= Y^ \hat{\mathrm{Y}} Y^

Consider the Following Short Run Aggregate Supply Equation: Y= $\hat{\mathrm{Y}}$