Which business cycle theory emphasizes that, because of long-term wage agreements, both expected and unexpected fluctuations in aggregate demand can change real GDP?
A) the new classical cycle theory
B) the new Keynesian cycle theory
C) monetarist cycle theory
D) Keynesian cycle theory

Question

Quizplus · Accepted Answer

The New Keynesian cycle theory emphasizes the role of wage and price stickiness, suggesting that due to long-term wage agreements and other factors, both expected and unexpected fluctuations in aggregate demand can indeed change real GDP. This contrasts with classical views that prices and wages adjust quickly to clear markets.

Which Business Cycle Theory Emphasizes That, Because of Long-Term Wage