What is a simple definition of Keynes' sticky prices theory?

In a downturn, it is easy for households, and firms to reduce spending, but difficult for suppliers to reduce prices. A big input that drives this is wages. It is very hard to negotiate wages downward in a depression/deflationary situation. Since prices can't fall to meet lower demand, the market can't correct itself out of the depression. This is why most economists view moderate positive inflation as more desirable than perfect price stability.

Answered by Shivani S. Economics tutor

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