A primary difference between the original and New Keynesian approaches is that in the original model nominal wages are ________,while for the New Keynesians nominal wages are ________.
A)perfectly flexible,slow to adjust
B)slow to adjust,perfectly flexible
C)fixed,slow to adjust
D)slow to adjust,fixed

Question

Quizplus · Accepted Answer

In the original Keynesian model, nominal wages are considered fixed in the short run, meaning they do not adjust quickly to changes in economic conditions. In contrast, New Keynesians believe that nominal wages are slow to adjust due to factors like wage contracts and menu costs, but not completely fixed.

A Primary Difference Between the Original and New Keynesian Approaches