Question: In the Keynesian system, increases in aggregate demand lead to increases in output because the money wage rises less than proportionately with the price level

In the Keynesian system, increases in aggregate demand lead to increases in output because the money wage rises less than proportionately with the price level in response to such increases in demand. This condition is necessary because firms will hire more workers only if the real wage (WIP) falls. Explain the possible reasons why the money wage does not adjust proportionately with the price level in the short-run Keynesian model.

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