February 22, 2020

ECLECTICS:WHAT DID WE LEARN FROM KEYNES?PART 24

and wages basically tend to be rigid,with the plausible outcome that quantity of output tends to adjust to shift in aggregate demand changes more than prices.Whereas the old keynesians assumed the stickiness of wages and prices,where the new keynesians have modeled explanation and the reason behind the expectation of this price and wage stickiness based on rational behaviour of economic agents like firms and individuals.The stickiness of prices driven by menu costs which are incurred when businesses change prices as compared to stickiness of wages tied to long term labour contracts.Wages are set and driven by longterm considerations,on the basis of implicit contracts theory.I wrote alot about John Maynard Keynes,the father of macroeconomics in my longest macroeconomic treatise"MACROECONOMIC THOUGHTS"written in series still running that you can refer to and i will like to end this tedious piece with the most famous fight in mordern economics,precisely the rivalry between Friedrick Von Hayek and J.M. Keynes.

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