Potential Consequences of a Change in Money Wage Under Keynesian Macroeconomics Theory

Abstract

This research paper has delved into wage dynamics and economic health. The author has chosen to juxtapose the Keynesian macroeconomics theory with that of the classical, aiming to critically examine the contrasting viewpoints of classical and Keynesian economic theories. The core of the analysis hinges on the Keynesian framework introduced by John Maynard Keynes, particularly with its stance on the implications of changes in nominal wage on the broader economy. Historical instances witnessing substantial wage fluctuations serve as real-world examples to substantiate the theoretical discussions, intending to uncover the causal factors and subsequent economic responses to these wage changes. To further bolster the inquiry, the study employs macroeconomic mathematical modelling to furnish quantitative insights that elucidate Keynesian assumptions on the labour market and its implications. By concentrating on the macroeconomic repercussions of nominal wage changes, as opposed to microeconomic consequences, this paper sheds light on the broader implications of wage adjustments in an economy, underpinned mainly by Keynesian perspectives.