A Principle Difference Between the Original Keynesian Model and the New

question 166

Multiple Choice

A principle difference between the original Keynesian model and the new Keynesian model is that in the new version

• A)the traditional assumptions of profit maximization is no longer included.
• B)monetary policy is impotent.
• C)wages and prices adjust slowly to market conditions.
• D)All of the above are correct.

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Definitions:

Abnormal Earnings

Profits that exceed or fall short of the average or expected earnings due to unusual circumstances or events.

Return on Net Assets

A financial metric measuring a company's ability to generate profit from its net assets, indicating efficiency in using assets to generate earnings.

Cost of Equity Capital

This refers to the return that investors require on their equity investment in a company, effectively the cost for a company to maintain equity financing.

Future Growth Opportunities

Potential avenues or prospects that can lead to an expansion of a business's operations and an increase in its profitability.