Unformatted text preview: Aggregate Supply Equilibrium Analysis Activists vs. non-activists. New-keynesian vs. New-classical The speed of adjustment depends on the degree of
price/wage stickiness, and economists disagree. Wages and prices are ﬂexible
Less need for government intervention Rapid adjustment Wages are inﬂexible, particularly downward
Need for active government policy Regardless of where output is initially, it returns eventually to
the natural rate!
Slow adjustment Self-Correcting Mechanism Aggregate Demand ...
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