The New Keynesian Sticky-Price Theory Indicates That an Increase in Aggregate

question 23

Multiple Choice

The new Keynesian sticky-price theory indicates that an increase in aggregate demand generates

• A) a speedy rise in real GDP but a sluggish increase in the price level.
• B) a speedy rise in the price level but a sluggish increase in real GDP.
• C) sluggish increases in both real GDP and the price level.
• D) rapid increases in both real GDP and the price level.

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Definitions:

Formative Years

A period of a person's life or an institution's existence that is crucial for development and shaping its future.

Militarily Weak

A descriptive term for a nation or entity that possesses limited military strength and capabilities compared to potential adversaries.

IRA

Individual Retirement Account; a financial tool in the United States for retirement savings with various tax advantages.

ETA

Estimated Time of Arrival; the predicted time when a vehicle, individual, or shipment is expected to reach a particular destination.