In the New Keynesian Open Economy Model with a Fixed

question 34

Multiple Choice

In the New Keynesian open economy model with a fixed exchange rate, suppose that the output gap is initially zero and there is an increase in labour supply. What is the correct policy response to keep the output gap at zero?

• A) Increase the money supply.
• B) Reduce government spending.
• C) Increase government spending.
• D) Reduce the money supply.
• E) Nothing.

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Definitions:

Masturbation

A sexual activity involving self-stimulation of the genitals for sexual pleasure or release.

Insanity

A legal term referring to a defendant's inability to understand the wrongfulness of their actions due to mental illness or cognitive impairment.

Reproductive Health

A state of complete physical, mental, and social well-being in all matters relating to the reproductive system and its functions and processes.

Egalitarians

People who believe in the principle of equality and equal rights for all.