Full Answer Section

The Keynesian perspective differed from earlier economic explanations of the Great Depression in a number of ways. First, Keynes argued that the economy could be in a state of equilibrium with high unemployment. This was a departure from the classical economic view that the economy would always tend to full employment.

Second, Keynes argued that the government could play a role in stimulating the economy. This was a departure from the classical economic view that the government should not interfere in the economy.

Wage and Price Stickiness

Wage and price stickiness refers to the fact that wages and prices do not always adjust quickly to changes in demand. This can be due to a number of factors, such as contracts, union resistance, or sticky costs.

The significance of wage and price stickiness in Keynesian analysis is that it can lead to a situation where aggregate demand is not equal to aggregate supply. This can cause unemployment and economic recession.

Keynesian economists argue that the government can play a role in reducing wage and price stickiness by providing subsidies, tax breaks, or other incentives to businesses. This can help to increase employment and economic growth.