New Keynesian Economists Question the Credibility of Cold Turkey Disinflation

question 51

Multiple Choice

New Keynesian economists question the credibility of cold turkey disinflation in the real world because

• A)the independence of central banks allows them to disregard public opinion.
• B)households and businesses do not form their expectations rationally.
• C)a reduction in money growth may reduce output and employment substantially in the short run.
• D)central banks lack the tools to bring the inflation rate down even in the long run.

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Definitions:

Demand-oriented

A pricing strategy where the price is set based on consumer demand, often adjusting prices in response to market conditions.

Target Pricing

A pricing strategy in which the selling price of a product is determined based on the desired profit margin and market conditions.

Ultimate Consumers

The end users who purchase products or services for personal use and not for manufacturing or resale purposes.

Odd-even Pricing

A pricing strategy that involves setting prices just below a round number, e.g., $99.99 instead of $100, to make a product seem less expensive.