According to a New Keynesian Theorist,a Correctly Anticipated Increase in Aggregate

question 67

Multiple Choice

According to a new Keynesian theorist,a correctly anticipated increase in aggregate demand will

• A) cause the price level to increase by a greater amount in the short run than what a new classical rational expectations theorist would predict.
• B) cause the price level to increase by a smaller amount in the short run than what a new classical rational expectations theorist would predict.
• C) cause the price level to increase by the same amount in the short run that a new classical rational expectations theorist would predict.
• D) leave the price level unchanged in the short run,but Real GDP will increase more than what a new classical theorist would predict.
• E) leave the price level unchanged in the short run,but Real GDP will increase less than what a new classical theorist would predict.

Differentiate between nominal, real, and inflation rates and calculate real rate of return.

Understand and apply the concept of risk premiums.

Identify and explain the effects of monetary policy changes on interest rates and the economy.

Explain the concept and implications of Bracket Creep.