The New Keynesian School

The New Keynesian School is an economic theory that builds on John Maynard Keynes' ideas, focusing on how prices and wages adjust slowly in response to changes in the economy. It emphasizes the role of market imperfections, such as monopolies and information gaps, which can lead to persistent unemployment and inefficient market outcomes. New Keynesians advocate for active government policies, particularly fiscal and monetary measures, to stabilize the economy during downturns, believing that such interventions can help restore full employment and economic growth when private markets fail to self-correct quickly.