Compare
Same question, different answers.
Pick a question and put it to every school. Each answer is a short summary of that school's position.
Compare
Pick a question and put it to every school. Each answer is a short summary of that school's position.
8 schools answer
7 schools answer
7 schools answer
7 schools answer
7 schools answer
Notice that the answers split on one thing: does the economy fix itself, and how fast?
Mostly job search taking time, or wages held above the level that clears the market by minimum wages, unions or benefits.
Not enough spending. Firms don't hire because they can't sell. Cutting wages can make it worse by cutting spending further.
Largely a choice: people work less when wages are temporarily low. Critics see this as the theory's weakest point.
Sticky prices let demand shocks hit jobs in the short run. In the long run there is a natural rate set by frictions in the labour market.
A “reserve army” of unemployed workers suits capitalism because it disciplines workers and holds wages down.
Demand-led all the way. There is no automatic return to full employment, even in the long run.
A policy choice. The government can always hire idle workers through a job guarantee.
The hangover from credit-fuelled bad investment. Workers must move out of bubble sectors, and intervention slows that down.