Under New Keynesian Theory,a Correctly Anticipated Decrease in Aggregate Demand

question 125

Multiple Choice

Under new Keynesian theory,a correctly anticipated decrease in aggregate demand will lead to __________ in Real GDP and __________ in the price level.

• A) a decrease; a decrease
• B) no change; an increase
• C) no change; no change
• D) an increase; an increase
• E) an increase; no change

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Definitions:

Gross Spread

The difference between the underwriting price received by the issuer of securities and the price at which the securities are sold to the public.

Oversubscription Privilege

A right given to current shareholders to purchase more shares of a new issue before it is offered to the public, usually at a discount.

Standby Privilege

A feature that may accompany preferred shares or bonds, allowing the holder the right to purchase additional shares at a fixed price.

Open Offer

An invitation by a company to its shareholders to purchase additional shares directly from the company at a specified price.