For several years, the U.S. unemployment rate has been below the Europ

For several years, the U.S. unemployment rate has been below the European unemployment rate. Offer a Keynesian explanation for this.

What will be an ideal response?

ANSWER

The aggregate supply curve in Europe is closer to horizontal than is the case in the United States. The labor market is less flexible in Europe due to higher unemployment benefits that reduce the incentive to work, and due to higher costs to firms for hiring workers.