The New Classical Model Has as Its Central Idea That

question 183

Multiple Choice

The new classical model has as its central idea that

• A)wage and price stickiness explain fluctuations in real GDP.
• B)workers and firms have rational expectations.
• C)the Federal Reserve should adopt a monetary growth rule.
• D)shifts in aggregate demand have no impact on real GDP.

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Definitions:

Profit-Maximizing

The strategy by which an organization sets the price and amount of output to achieve the maximum profitability.

Market Price

The current price at which an asset or service can be bought or sold.

Perfectly Competitive Market

A hypothetical market where all participants are price takers, and goods are perfect substitutes, leading to an efficient distribution of resources.

Average Variable Cost

The average amount of variable cost per unit, calculated by dividing total variable costs by the quantity of output.