The Main Difference Between the New Keynesian Model and the Basic

question 56

Multiple Choice

The main difference between the New Keynesian model and the basic monetary intertemporal model is that in the New Keynesian model,

• A) the price level is sticky in the short run.
• B) wages are sticky in the short run.
• C) menu costs are insignificant.
• D) firms are backward-looking.
• E) prices adjust quickly to equate the supply and demand for goods.

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Definitions:

Production Technique

A method or process employed in the transformation of raw materials, components, or parts into finished goods ready for the market or subsequent processing.

Demand Curve

A graphical representation showing the relationship between the price of a good and the quantity of the good that consumers are willing and able to purchase at each price level.

Swimwear Market

The industry segment that deals with the production and sale of clothing designed for swimming and related activities.

Government Subsidy

Financial assistance provided by the government to individuals, organizations, or industries to support activities deemed beneficial for the public or economy.