Prices are regarded as sticky in ________.
A)new Keynesian and traditional Keynesian theory
B)real business cycle and new Keynesian theory
C)real business cycle and traditional Keynesian theory
D)traditional Keynesian,new Keynesian and real business cycle theory

Question

Quizplus · Accepted Answer

Prices are regarded as sticky in both new Keynesian and traditional Keynesian theory, where they play a critical role in explaining short-term economic fluctuations. In real business cycle theory, however, prices are considered flexible and markets are efficient, which implies that economic fluctuations are a result of external shocks and changes in productivity. Therefore, the correct choice is A, new Keynesian and traditional Keynesian theory.

Prices Are Regarded as Sticky in ________