CFA Practice Question

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CFA Practice Question

Which model(s) assume(s) sticky wages (workers don't want to lower their wages to help the market reach a new equilibrium)?

I. Keynesian school
II. Neo-Keynesian school
III. New Classical school
A. I only
B. III only
C. I and II
Explanation: They both assume slow-to-adjust wages. The Neo-Keynesian school, in addition, assumes that other prices are slow to adjust as well (menu costs).

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