Which of the following is/are reasons for money wage rigidity according to Keynesian economics ? A.…
In Keynesian and New Keynesian macroeconomics, downward rigidity of nominal (money) wages is explained by workers' money illusion and concern for relative wages (A),…
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Which of the following is/are reasons for money wage rigidity according to Keynesian economics ?
A. Money Illusion
B. Wage fixation through contracts
C. Minimum wage laws
D. Efficiency wages
Answer and explanation
Correct answer D
In Keynesian and New Keynesian macroeconomics, downward rigidity of nominal (money) wages is explained by workers' money illusion and concern for relative wages (A), multi-period collective-bargaining and wage contracts (B), statutory minimum-wage floors (C), and firms paying above-market efficiency wages to maintain worker productivity and morale (D). Therefore, all four statements A, B, C, and D are correct.
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