In the New Keynesian Open Economy Model, If the Exchange

question 47

Multiple Choice

In the New Keynesian open economy model, if the exchange rate is fixed

• A) fiscal policy and monetary policy are powerless.
• B) fiscal policy is an effective stabilization tool.
• C) a change in current total factor productivity increases output.
• D) monetary policy is an effective stabilization tool.
• E) the real interest rate is an effective tool that can be changed by the central bank.

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Definitions:

Orders

Directions or instructions that dictate a specific action or response to be taken.

Influencing Conformity

The process by which individuals adjust their behaviors, attitudes, or beliefs to match those of a group or to meet group standards.

Conformity

The act of matching attitudes, beliefs, and behaviors to what is considered normal or standard in a specific social group.

Asch

Refers to Solomon Asch, the psychologist famous for his research on conformity, including his experiment demonstrating how group pressure can lead individuals to conform to an incorrect answer.