New Keynesian Economics Differs from Real Business Cycle Economics in That

question 34

Multiple Choice

New Keynesian economics differs from real business cycle economics in that

• A)markets are perfectly competitive in new Keynesian models.
• B)business cycles are fluctuations in the natural rate of unemployment in new Keynesian models.
• C)wages and prices are perfectly flexible.
• D)agents maximize utility in the new Keynesian model.
• E)none of the above.

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Definitions:

Affect Heuristic

A mental shortcut that allows people to make decisions and solve problems quickly based on their emotions and feelings.

House Money

Refers to the concept of playing with the profits from previous bets rather than one's own capital.

Irrational Behavior

Actions or decisions that are not based on logical reasoning, sound judgment, or align with standard economic theories or expectations.

Regret Aversion

A behavior in decision-making where individuals or entities tend to avoid actions that could potentially lead to regret in the future.