In the new Keynesian model,sticky prices may be due to ________.
A)involuntary unemployment
B)negative productivity shocks
C)positive productivity shocks
D)staggered prices

Question

Quizplus · Accepted Answer

The new Keynesian model suggests that prices are not fully flexible in the short run and that they can remain sticky due to staggered price setting behaviors of firms. Specifically, firms do not immediately adjust their prices in response to shocks, but instead set new prices randomly, infrequently, and in a staggered manner over time. This can lead to price rigidity and can help explain why output, employment, and inflation can be affected by various shocks in the economy.

In the New Keynesian Model,sticky Prices May Be Due to ________