Chapter 10-Keynes Assumptions

Question 1

Keynes Assumptions:

Answer 1

1. Wages are not flexible, they can increase but never decrease
2. Prices are constant in the short run, but not in the long run –> not very competitive good market
3. We need government intervention
4. Investment is driven by expectations (income) and not by interest rate
5. We had a closed economy
   AD= C + I + G
6. Money is most relevant in the AB