A Central Concept of New Keynesian Macroeconomics Is That in Setting

question 135

Multiple Choice

A central concept of New Keynesian macroeconomics is that in setting prices and wages,self-interested firms and workers are acting

• A)irrationally,since their self-interest is badly damaged by the ensuing business cycles.
• B)irrationally,since this imposes business cycles on everyone not part of their arrangements.
• C)rationally,since they do not bear a fully offsetting cost of business cycles.
• D)rationally,since the total welfare loss of business cycles must be small enough to justify the price and wage setting.

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Definitions:

Cohort Effect

A cohort refers to people born at roughly the same time, and a cohort effect refers to differences in age cohorts (e.g., people born in 1930 versus those born in 1980) as a result of unique social and historical events they have experienced.

Cross-Sectional Surveys

Research tools used to gather information from a sample population at one specific point in time to analyze trends or patterns.

Theoretical Frameworks

Structured sets of concepts and ideas that guide academic research and interpretation of data.

Freud

Sigmund Freud was an Austrian neurologist and the founder of psychoanalysis, a method for treating psychopathology through dialogue between a patient and a psychoanalyst.