The New Keynesian View Is That When the Economy Is

question 44

Multiple Choice

The new Keynesian view is that when the economy is NOT in a liquidity trap:

• A) monetary policy is more effective than fiscal policy.
• B) fiscal policy is more effective than monetary policy.
• C) crowding out will not occur.
• D) time lags are minimized.

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Definitions:

Accounting Basis

The method by which accounting transactions are recognized and recorded, such as cash basis or accrual basis accounting.

Financial Break-even

The point at which total revenues equal total expenses, and the company makes no profit or loss.

Discounted Basis

A method of purchasing or selling a financial instrument (e.g., a bond) for a price that is below its nominal or face value, reflecting the present value of its future cash flows.

Cash Basis

An accounting method where revenues and expenses are recorded only when cash is received or paid, respectively.