How does the original, simplified Keynesian model compare with modern Keynesian analysis?
A) The original Keynesian model assumed price flexibility whereas the modern analysis does not.
B) In both cases, the short-run aggregate supply curve (SRAS) is horizontal.
C) Modern analysis shows an upward sloping SRAS to reflect some price flexibility. The original Keynesian model's SRAS is horizontal and assumes sticky prices.
D) All of the above.

Question

Quizplus · Accepted Answer

The original Keynesian model assumed price flexibility, while the modern analysis assumes sticky prices. Both models have a horizontal short-run aggregate supply curve (SRAS). However, modern analysis shows an upward sloping SRAS to reflect some price flexibility, whereas the original Keynesian model's SRAS is horizontal and assumes sticky prices.

How Does the Original, Simplified Keynesian Model Compare with Modern