If the Central Bank in a New Keynesian Model Can

question 20

Multiple Choice

If the central bank in a New Keynesian model can always reduce the output gap to zero

• A)the price level will be procyclical.
• B)investment will be procyclical if there are total factor productivity shocks.
• C)consumption will be countercyclical if there are total factor productivity shocks.
• D)the price level will be countercyclical.
• E)this would be inefficient.

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