The Main Difference Between New Classical and New Keynesian Theory

question 120

Multiple Choice

The main difference between new classical and new Keynesian theory is with respect to the assumption of

• A) how expectations are formed.
• B) how flexible wages and prices are.
• C) the slope of the SRAS curve.
• D) the slope of the AD curve.

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Definitions:

Agent

A person or entity authorized to act on behalf of another, usually in a business or legal capacity, to create a legal relationship with a third party.

Agency Relationship

A legal arrangement where one party, the agent, is authorized to act on behalf of another party, the principal, in business transactions.

Undisclosed Principal

A person who is represented by an agent in a transaction but whose identity is not revealed to the third party involved in the transaction.

Breached Contract

A situation where one or more parties to a contract fail to fulfill their obligations as specified in the agreement.