If Keynes's theory is correct,wage rates may be _______________ in a _____________ direction which means that the __________ curve will not shift to the __________ to remove the economy from a recessionary gap as it would in a self-regulating economy.
A) inflexible; downward; AD; right
B) flexible; upward; SRAS; right
C) flexible; downward; AD; right
D) inflexible; upward; SRAS; left
E) inflexible; downward; SRAS; right

Question

Quizplus · Accepted Answer

Keynes's theory suggests that wage rates may be inflexible downward, meaning workers and unions resist wage cuts. This inflexibility in the downward direction implies that the Short-Run Aggregate Supply (SRAS) curve will not shift to the right to help the economy recover from a recessionary gap, contrasting with the self-regulating economy assumption where wages adjust to clear the labor market.

If Keynes's Theory Is Correct,wage Rates May Be _______________ in a _____________

If Keynes's Theory Is Correct,wage Rates May Be ___ in a _