Employing the New Keynesian Concepts of "Macroeconomic Externality" and "Coordination

question 41

Multiple Choice

Employing the New Keynesian concepts of "macroeconomic externality" and "coordination failure": if nominal aggregate demand and marginal cost fall by the same proportion,society ________ afford to compensate firms for the profit they lose when they ________.

• A)can,bear the menu costs of changing prices
• B)can,hold prices constant
• C)cannot,bear the menu costs of changing prices
• D)cannot,hold prices constant

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