In the New Keynesian View, Disinflation Is Costly Primarily Because

question 59

Multiple Choice

In the new Keynesian view, disinflation is costly primarily because

• A)workers and firms lack rational expectations.
• B)policy announcements are rarely credible.
• C)nominal wages and prices are sticky.
• D)disinflation policy shifts the LRAS curve.

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Definitions:

Debt Ratio

A financial ratio that measures the proportion of a company's total debt to its total assets, indicating its leverage level.

Times Interest Earned Ratio

A measure of a company's ability to meet its debt obligations, calculated by dividing earnings before interest and taxes by interest expense.

Loaning Money

The act of giving money to another party with the agreement that the money will be repaid, often with interest.

Debt-Equity Ratio

A measure of a company's financial leverage, calculated by dividing its total liabilities by its shareholders' equity.