John Maynard Keynes believed that wages may be inflexible in the downward direction.Consequently,an economy

Question

Quizplus · Accepted Answer

If wages are sticky and cannot adjust downwards, then prices will also stay high, causing firms to produce less and hire fewer workers, leading to a recessionary gap. This is because workers will continue to demand high wages even though demand for goods and services has decreased, resulting in a situation where supply exceeds demand. Therefore, choice B is the correct answer. Choices A, C, and D are incorrect because they do not accurately describe the situation that occurs when wages are sticky.

John Maynard Keynes Believed That Wages May Be Inflexible in the Downward