The flaw of the original Keynesian model of the business cycle is that it
A)assumes away output fluctuations.
B)assumes complete wage rigidity.
C)assumes unrealistic fooling of workers.
D)requires procyclical wage movements and continuous labor market equilibrium.

Question

Quizplus · Accepted Answer

The original Keynesian model assumed complete wage rigidity, meaning that there would be no adjustment in wages in response to changes in supply and demand in the labor market. This assumption has been criticized because wage rigidity is not complete, and workers may be willing to accept lower wages during a recession to avoid unemployment.

The Flaw of the Original Keynesian Model of the Business