... evidence of any gap between actual output and potential output that can be reduced through stabilisation policy, any excess unemployment which exists is assumed to be essentially voluntary- workers have the option of accepting low wages to obtain jobs. New Keynesian macroeconomists don't believe that markets clear continuously because of the existence of imperfect competition and menu costs, prices tend to be sticky and adjust slowly to changing economic conditions. If sudden shocks occur simultaneously, prices will not adjust quickly enough to clear markets, therefore economy can remain in a state of disequilibrium for years due to the failure of the prices to adjust quickly. Moreover, NKM believe that any unemployment caused in a recession is voluntary. Wages are quick to adjust with a substantial time lag to change in aggregate demand, due to long term labour contracts and implicit contracts New Keynesians don't however simply assume wages are rigid ...

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