Which of the Following Statements Accurately Expresses the Assumptions on Which

question 29

Multiple Choice

Which of the following statements accurately expresses the assumptions on which new Keynesian and new classical theory are based?

• A)New Keynesian economics assumes that the economy can reach equilibrium below the natural rate of unemployment, whereas new classical economics assumes that macroeconomic equilibrium is always at the natural rate of unemployment.
• B)New Keynesian economics maintains that government intervention is unnecessary, whereas classical economics supports an active government role.
• C)New Keynesian economics assumes that the long-run Phillips curve is vertical, whereas new classical economics views the long-run Phillips curve as horizontal.
• D)New Keynesian economics assumes that all prices are flexible, whereas new classical economics applies a fixed-price model.
• E)New Keynesian economics emphasizes short-run reductions in inflation rates, whereas new classical economics focuses on short-run reductions in the unemployment rate.