Keynes argued that because of sticky prices and wages
A) the short-run aggregate supply curve could be horizontal.
B) the short-run aggregate supply curve is probably vertical.
C) the long-run aggregate supply curve slopes downward.
D) the aggregate demand curve is vertical.

Question

Quizplus · Accepted Answer

Keynes argued that sticky prices and wages can cause short-run aggregate supply curve to be horizontal instead of vertical. This means that in the short run, changes in aggregate demand can lead to changes in output rather than just changes in prices.

Keynes Argued That Because of Sticky Prices and Wages