Comparison of the Price-Misperceptions Model and the New Keynesian Model

Discussion 1: “Comparison of the Price-Misperceptions Model and the New Keynesian Model.” Please respond to the following:

  • In the price-misperceptions model, an increase in the amount of labor supplied in the market was offset by a decline in the real wage rate. Analyze the difference between the price-misperceptions model and the new Keynesian model with regard to this phenomenon, and discuss how the concept of markup ratio affects the difference in the two (2) models’ approaches.