Which business cycle theory emphasizes that, because of long-term wage agreements, both expected and unexpected fluctuations in aggregate demand can change real GDP?
A) Keynesian cycle theory
B) the new classical cycle theory
C) the new Keynesian cycle theory
D) monetarist cycle theory

Question

Quizplus · Accepted Answer

The new Keynesian cycle theory emphasizes that wage rigidities can lead to changes in real GDP due to expected or unexpected fluctuations in aggregate demand. This contrasts with the new classical cycle theory, which assumes flexible wages and prices, and the monetarist cycle theory, which emphasizes the role of changes in the money supply. The Keynesian cycle theory, while also emphasizing wage rigidities, does not explicitly discuss unexpected fluctuations in aggregate demand.

Which Business Cycle Theory Emphasizes That, Because of Long-Term Wage