An Important Difference Between the New Classical and New Keynesians

question 27

Multiple Choice

An important difference between the new classical and new Keynesians views is that new classicals

• A)assume that all firms are price takers, but new Keynesians assume that some firms are price setters.
• B)take into account the existence of long-term nominal wage and price contracts, but new Keynesians do not believe they are important.
• C)focus on the importance of investment spending, but new Keynesians believe that government spending is more important.
• D)believe that the aggregate supply curve is horizontal, even in the short run, but new Keynesians believe that the aggregate supply curve slopes upward in the short run.

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Definitions:

Real Stressor

A tangible or actual event, condition, or stimulus that causes stress to an individual.

Potential Stressor

Any event, situation, or condition that may cause one to feel stressed, due to the potential for creating psychological strain.

Induces Stress

Causes or triggers a state of mental or emotional strain or tension resulting from adverse or demanding circumstances.

Type A Behaviour Pattern

A personality disposition characterized by competitiveness, urgency, aggression, and a constant struggle for achievement.