journal unit 5.doc - JOURNAL ASSIGNMENT UNIT 5 UNIVERSITY...

This preview shows page 1 - 3 out of 3 pages.

JOURNAL ASSIGNMENT UNIT 5 UNIVERSITY OF PEOPLE TERM 1, AY 2020-2021 OCTOBER 05, 2020
New Keynesian Economics is a part of a macroeconomic school which came into existence in the year 1980 for the sole purpose of responding to the criticism which the classical economist had thrown on several Keynes theories while providing it with microeconomic foundations. The new Keynesian economics lay emphasis on nominal wages, prices, and real wages, therefore in the time of recession, it will prevent the market from self-adjusting, while providing a rationale for government intervention with the means of countercyclical monetary or fiscal policy, thereby help to increase the aggregate demand. (Mankiw, 2008, final parr.). As for the stickiness of wages explanation, it is used to clarify the wages which are set on the basis of contracts for a long period of time, while the trade union is trying to prevent while lowering it down. The stickiness of process explanation also clarify why the lowering in price is

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture