Question

Discuss the main aspects of the New Keynesian (NK) model

Answer 1

N.K.model is a modern macroeconomic school of thought that evolved from classical keynesian economics .this maintain that prices and wages are sticky.sticky price means it adjust more slowly to short term economic fluctation..this sticky prices caused involuntary unemployment

This is based upon two main points .like aggreagte demand is more likely than aggreagte supply .it is the primary cause of short run economic event like recession etc.second wages and prices can be sticky .thats why in an economic downturn unemployment can result.