What, according to keynesian economists, are the factors that lead to rigidities in wages and prices?
Answers
According to Keynes, due to money wage rigidity, that is, downward .money wages, Keynes gave three reasons for the stickiness of money wage rate and told that money wage rate is cause for unemployment of labour. The workers become disappointed because of not getting proper money for their work. So they don't given effort to do work then they leave the job and in society increase the unemployment. Money wags don't change the unemployment of labour. It doesn't fulfill the employment opportunities.
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The practical difficulties pointed out by Keynes and his followers which are faced by firms in reducing wages and which therefore explain money wage rigidity or stickiness. The sticky or rigid money wages above the equilibrium level cause unemployment of labour.
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