The available evidence provides the most support to which perspective regarding the short-run effect of monetary policy?
A)New Keynesian
B)New classical
C)Real business cycle
D)Monetarist

Question

Quizplus · Accepted Answer

The New Keynesian perspective emphasizes the importance of nominal rigidities in the short run, such as sticky prices and wages. This implies that changes in monetary policy can affect output and inflation in the short run. This perspective is supported by the empirical evidence that changes in monetary policy have a significant and persistent effect on output and inflation in the short run. The other perspectives (New classical, Real business cycle, and Monetarist) give less weight to the short-run effects of monetary policy and instead emphasize longer-run effects or the role of real factors in determining output and inflation.

The Available Evidence Provides the Most Support to Which Perspective