The New Keynesian Theories Which Are Based on Microeconomic Foundations

question 29

Multiple Choice

The new Keynesian theories which are based on microeconomic foundations assert that

• A)unanticipated fiscal policy changes cannot affect the output level in the short run
• B)anticipated monetary policy changes have no real short-run effect on output
• C)under imperfect competition individual actions of consumers or firms can lead to socially undesirable outcomes
• D)markets tend to be perfectly competitive, so firms are price takers
• E)most firms have considerable monopoly power, so they change their prices immediately after a disturbance has occurred

---

Definitions:

Reticular Activating System

A network of nerves in the brainstem that mediates overall alertness and regulates the transition between sleep and wakefulness.

Extraversion/Introversion

Personality traits that describe the social preferences of individuals, with extraversion indicating a preference for external stimulation and social interaction, and introversion indicating a preference for solitude and internal experiences.

Overaroused

A state of heightened physiological and psychological activity, often leading to stress, anxiety, or heightened sensory sensitivity.

Frontal Lobes

Regions of the brain located at the front part of the cerebral cortex, responsible for executive functions, decision making, controlling impulses, and emotional expression.