According to Some New Keynesian Theories, One Possible Rationale for Active

question 119

Multiple Choice

According to some New Keynesian theories, one possible rationale for active policy making is

• A) flexible prices.
• B) sluggish adjustment of the price level in response to changes in aggregate demand
• C) people are not rational and so do not react to incentives.
• D) growing competition in U.S. product markets.

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Definitions:

Prices

The amount of money required to purchase a good or service, often determined by the forces of supply and demand in the market.

Marginal Utility

The additional satisfaction or benefit received by a consumer from consuming one more unit of a good or service.