Which explanation for persistent unemployment used by the original Keynesian model is no longer needed in the new Keynesian model?
A)shifting IS curve
B)a fixed nominal wage
C)aggregate supply curve is a function of the nominal wage
D)rigid wages and prices

Question

Quizplus · Accepted Answer

The original Keynesian model relied on the assumption of a fixed nominal wage to explain persistent unemployment. New Keynesian models, however, incorporate various reasons for wage and price stickiness, making the assumption of a fixed nominal wage unnecessary for explaining unemployment.

Which Explanation for Persistent Unemployment Used by the Original Keynesian