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

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Definitions:

Base Level

The lowest point to which a stream or river can erode its channel, often determined by the body of water into which the river flows, such as an ocean, lake, or larger river.

Subsidence

The process by which the earth's surface sinks or lowers, often due to natural underground material movement or removal of groundwater.

Average Gradient

The average gradient refers to the rate of elevation change over a particular distance, often used in geographical and hydrological analysis to describe slopes.

Base Level

The lowest point to which erosion by running water can lower the landscape, ultimately the sea level or lake level where rivers end.