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:

Freight

Goods transported in bulk by truck, train, ship, or airplane.

Net Proceeds

The amount of money received from a transaction after all costs and expenses have been paid.

Commission

A fee paid for services, usually a percentage of the total transaction, often used as a compensation method in sales and services industries.

Merchandise

Goods or products that are bought and sold in business.