New Keynesian Theory

question 56

Multiple Choice

New Keynesian Theory

• A) specifies financial markets as the primary cause of business cycles.
• B) includes microeconomic foundations and does not rely on sticky wages or prices.
• C) relies on sticky wages and prices but does not include microeconomic foundations.
• D) uses the same microeconomic foundations as other macro models.
• E) specifies shocks to technology cause business cycles.

---

Definitions:

Diversify

The attempt to spread investment risk by selecting a variety of investment options within a portfolio.

Adage

A short, pointed and memorable saying that expresses a truth or insight.

Private Saving

The portion of an individual's or household's income that is not spent on consumption or taxes and is instead set aside for future use.

National Saving

The total amount of savings generated within a country, which equals the sum of private and public savings.