Macro- & Monetary Economics

Prio: Normal, Part II: Keynes, Type: MC, Quiz 2

In Keynesian theory (sticky wage model), monetary policy can fight Keynesian unemployment because
 

  • it triggers crowding out
  • it lowers the real interest rate and hence stimulates investment demand
     
  • it directly raises the price level by engineering an excess supply of money
     
  • it stimulates labor demand because firms have more money to spend with an excess supply of money
     
 

Diskussion