The Difference Between New Classical Theory and New Keynesian Theory

question 148

Multiple Choice

The difference between new classical theory and new Keynesian theory is that

• A) in new classical theory wages are assumed to be flexible,and in new Keynesian theory wages are assumed to be somewhat inflexible.
• B) in new classical theory wages are assumed to be somewhat inflexible,and in new Keynesian theory wages are assumed to be flexible.
• C) adaptive expectations is the dominant expectations theory in new classical theory,and rational expectations is the dominant expectations theory in new Keynesian theory.
• D) in new Keynesian theory the short-run aggregate supply curve is vertical,and in new classical theory the short-run aggregate supply curve is upward sloping.

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Definitions:

Antipsychotic Medication

Drugs used to manage psychosis, including symptoms such as delusions, hallucinations, and disturbed thought processes, often prescribed in schizophrenia and bipolar disorder.

Symptoms

Signs or indications of a condition or disease experienced by an individual, often leading to a diagnosis.

Schizophrenia

A serious mental disorder characterized by distorted thinking, perceptions, emotions, language, sense of self, and behavior.

Antidepressant Drugs

Medications designed to alleviate symptoms of depression by adjusting the balance of neurotransmitters in the brain.