# In classical macroeconomics, why Labor supply responds to real wages and not money wages?

real wages = money wages/price(P). what are the assumptions here? why labor doesn't respond to money wages ?

According to Keynes (General Theory, 1936), the nominal wage (money wages) is completely unresponsive to current-period developments (at least over some range):$$W=\bar{W}$$ As you can see, because nominal wages are sticky, the result is an imperfect labour market. Because the labour market is imperfect, there is unemployment. The labor market has some non-Walrasian feature that causes the equilibrium real wage to be above the market-clearing level. In Keynes's model, aggregated labour supply is given. Firms are competitive and their prices are flexible, and so they hire labor up to the point where the marginal product of labor equals the real wage: $$F'(L)=\frac{\bar{W}}{P}$$ The main conclusion of Keynes' model is that GDP and real wages are countercyclical. Later, it was turned out to be moderately procyclical by empirical research.