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"and Rational Expectations." New Keyesianism.
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Like Neo-Keynesianism, New Keynesianism is Keynesian in the short run but neoclassical in the long run.
However, unlike the neoclassical synthesis, New Keynesianism attempts to provide theoretical explanations for a variety of market failures, mainly through Microeconomic Foundations
* [https://en.wikipedia.org/wiki/Menu_cost Menu costs]: The restaurants can print out new menus in response to their price changes, hence the name. However, menu cost is actually the cost of firms adjusting their nominal prices. The burden causes businesses to change prices slowly rather than continuously. The macroeconomic effect of changing a single firm's price on the demand of all products is called the "aggregate-demand externality."
* [https://en.wikipedia.org/wiki/Calvo_(staggered)_contracts The staggering of prices]: According to New Keynesians, enterprises don't set prices at the exact same time. Each one cares about its price relative to the ones charged by other firms. As a result, the prices are sluggish because no firms want to be the first to increase its price significantly.
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