Assuming that workers will be pushed off their labor supply curve in response to a change in aggregate demand is part of which of the following theories?
A)Classical
B)Keynesian
C)New Classical
D)Both Classical and Keynesian

Question

Quizplus · Accepted Answer

This assumption is part of the Keynesian theory, which emphasizes the role of aggregate demand in determining employment levels and thus assumes that workers will not always adjust their wages downward to maintain full employment in response to a decrease in aggregate demand. In contrast, the Classical and New Classical theories assume that wages and prices are flexible, and that markets will clear through adjustments in prices and wages, leading to full employment in the long run.

Assuming That Workers Will Be Pushed Off Their Labor Supply