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when the FOP are constant in the Short-run, do both keynesian and Neo classical consider this like sticky wages?

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when the FOP are constant in the Short-run, do both keynesian and Neo classical consider this like sticky wages?

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Keynesians believe that in a downturn households will save rather than spend which will in turn cause a further downturn. Also that prices wont lower in response to downturn due to sticky wages.

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When firms are not able to pay workers because costs are too high, they prefer to lay off workers. Also if a firm decides to reduce wages, it affects output due to morale and other factors of production. That is why wages can only go up and sticky while going down.

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Keynesians would use an expansionary fiscal policy to try to close the recessionary gap. The money injected into the economy to close the gap would be less than the size of the gap because of utilization of the multiplier effect

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Workers are not willing do decrease wages so firms lay off workers.

Jose
FOP are price constant in the shor-trun and wages is a FOP

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The Neo-Classical self corrects
It assumes that prices are downwardly flexible

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As, according to their model, any fall in AD will result in deflation and a short term fall in realGDP. But due to it's intersection with the LRAS curve there is a return to potential GDP in the long-term. This is due to the fact that during a recession the price level will drop and this means firms and consumers can more easily make investment or purchases. This process is the same with inflationary gaps but in reverse. They argue that government spending to rectify these gaps crowds out this spending by firms and consumers in a recession.

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What policies would Keynesians use in a recessionary gap?

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What policies would Keynesians use in a recessionary gap?

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What policies would Keynesians during an  inflationary gap?

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What policies would Keynesians during an  inflationary gap?

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Keynesians would use a contractionary fiscal policy. Increasing taxes or reducing g spending to shift the AD curve to the left.

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Why do Neo-classical economics argue that economic fluctuations in the business cycle (inflationary and deflationary gaps) will self-correct?

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Why do Neo-classical economics argue that economic fluctuations in the business cycle (inflationary and deflationary gaps) will self-correct?

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Why do Keynesians argue that the macroeconomy will not self-correct during an economic downturn?

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Why do Keynesians argue that the macroeconomy will not self-correct during an economic downturn?

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What is meant by 'sticky wages', why does this matter?

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What is meant by 'sticky wages', why does this matter?

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Considers sticky wages