That wage and price rigidities cause changes in aggregate demand to lead to changes in real output is a concept associated with
A) classical economists.
B) new classical macroeconomists.
C) real business cycle theorists.
D) new and traditional Keynesians.
E) supply-side economists.

Question

Quizplus · Accepted Answer

The concept that wage and price rigidities cause changes in aggregate demand to lead to changes in real output is usually associated with the new and traditional Keynesian schools of thought. Classical economists and supply-side economists, in contrast, emphasize the importance of flexible prices and wages in ensuring that market forces can effectively allocate resources and stabilize the economy in the long run. Real business cycle theorists also tend to downplay the role of aggregate demand in driving business cycles, arguing that changes in technology and productivity are the primary drivers of fluctuations in real output. New classical macroeconomists focus on the ability of rational expectations and market clearing to ensure that fluctuations in aggregate demand do not lead to extended periods of unemployment or output.

That Wage and Price Rigidities Cause Changes in Aggregate Demand