According to New Keynesian Theory, an Increase in Financial Frictions

question 34

Multiple Choice

According to new Keynesian theory, an increase in financial frictions might lead to ________, if ________.

• A) a smaller decrease in output; expected inflation is reduced
• B) a larger decrease in output; expected inflation rises
• C) a decrease in inflation; the disruption of capital markets results in a leftward shift of long-run aggregate supply
• D) a smaller decrease in output; a decline in expected output causes a leftward shift of aggregate demand

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Definitions:

Social Class

A division of a society based on social and economic status, affecting people's lifestyles, attitudes, and behaviors.

Occupation

Refers to one's profession or type of job, often characterized by a specific skill set or training.

Occupational Prestige

The collective evaluation by society of the desirability and importance of certain occupations over others, often based on factors such as income, education required, and perceived social value.

Social Mobility

The movement of individuals, families, or groups through a system of social hierarchy or stratification.