According to the Hypothesis of New Keynesian Inflation Dynamics, an Increase

question 83

Multiple Choice

According to the hypothesis of New Keynesian inflation dynamics, an increase in aggregate demand brings about

• A) initial sluggish adjustment of the price level followed by higher inflation later on.
• B) initial rapid adjustment of the price level followed by lower inflation later on.
• C) initial sluggish adjustment of real GDP followed by more rapid real GDP growth later on.
• D) sluggish growth in real GDP both initially and later on.

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Definitions:

Secondary Market

The marketplace for buying and selling previously issued securities or financial instruments, such as stocks and bonds.

Initial Sale

The first time a company's product or service is sold, marking the beginning of its commercial journey.

Security

A financial instrument that represents an ownership position in a publicly-traded corporation (stock), a creditor relationship with a governmental body or a corporation (bond), or rights to ownership as represented by an option.

Financial Intermediaries

Institutions that facilitate the channeling of funds between savers and borrowers, by ensuring the flow of capital.