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What is the cause of Keynesian perfectly elastic Aggregate Supply curve?
Wage price rigidity
Constant Marginal Product of Labour
Both of these
None of these
- Option 1: Wage price rigidity
- The Keynesian perspective suggests that wages and prices are "sticky" and do not adjust quickly to changes in demand.
- This rigidity leads to a perfectly elastic aggregate supply curve at low levels of output.
- Option 2: Constant Marginal Product of Labour
- Assumes that the marginal product of labor remains constant, implying that additional labor can be employed without increasing wages.
- Contributes to the horizontal nature of the Keynesian aggregate supply curve.
- Option 3: Both of these
- The combination of wage price rigidity and constant marginal product of labor supports the perfectly elastic supply curve in Keynesian analysis.
- Option 4: None of these
- If neither factor was applicable, this would be correct, but it does not apply here.
The correct answer is Option 3: Both of these.
By: santosh ProfileResourcesReport error
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