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Wage price flexiblity classical versis keynseians approach |
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Answer» Keynes ARGUED that prices and wages are not as FLEXIBLE as the CLASSICAL theory asserts. Wages tend to be rigid on the DOWNSIDE because workers will not accept wages that do not permit them to live adequately; this is reinforced by the actions of unions. If wages are too low, unemployment will exist. In the case of prices, firms producing large tag items prefer to cut production and lay off workers than cut prices. Their monopoly power often permits them to act that way. |
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