In the New Keynesian Model, an Increase in Current Government

question 8

Multiple Choice

In the New Keynesian model, an increase in current government spending

• A) increases output and leaves the real interest rate unchanged.
• B) increases output and decreases the real interest rate.
• C) decreases output and increases the real interest rate.
• D) decreases output and decreases the real interest rate.
• E) decreases output and increases the real wage rate.

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Definitions:

Retention Ratio

A financial metric indicating the percentage of a company's income retained and reinvested after dividends are paid to shareholders.

Debt-Equity Ratio

A ratio indicating the finance strategy of mixing shareholders' equity and debt for asset acquisition.

Profit Margin

A financial performance metric that indicates the percentage of revenue that remains as profit after accounting for costs and expenses.

Sustainable Rate Of Growth

The maximum rate at which a company can grow its sales and earnings without increasing its financial leverage or debt.