New Keynesians argue that prices and wages are sticky. Explain how sticky wages might result in increased production in the Short run in response to increases in AD (aggregate demand). What would a Real Business Cycle economist say about the New Keynesian assertion?
to change the real interest rate? Keynesians would argue that discretionary monetary policy in its capacity to change the real interest rate and bring about appropriate changes in aggregate expenditure (and for that matter private construction investment expenditure)
A) is more effective...