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    Question

    Which of the following is not an assumption of Keynesian

    Simple model?
    A Flexible wages Correct Answer Incorrect Answer
    B There are constant returns to scale so that prices do not rise or fall as output increases Correct Answer Incorrect Answer
    C The economy is closed — there is no export and import Correct Answer Incorrect Answer
    D Labor has money illusion Correct Answer Incorrect Answer

    Solution

    Keynesian economics assumes that there is wage rigidity.

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