The horizontal portion of the short-run aggregate supply curve reflects the Keynesian assumption of "sticky" prices.

Question

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The Keynesian assumption of "sticky" prices means that prices do not adjust immediately to changes in demand and/or supply in the short run, leading to a horizontal portion of the short-run aggregate supply curve. This is consistent with the Keynesian view that changes in aggregate demand can have a significant impact on output and employment in the short run, as prices do not adjust quickly enough to offset fluctuations in demand.

The Horizontal Portion of the Short-Run Aggregate Supply Curve Reflects