Changes in the money supply in the New Keynesian model is not a likely explanation of the typical business cycle, because the model counterfactually predicts that
A) consumption is procyclical and the price level is procyclical.
B) the price level is procyclical and the real wage is countercyclical.
C) the real wage is countercyclical and the real money supply is procyclical.
D) the real money supply is procyclical and consumption is procyclical.
E) consumption is procyclical and the real wage is countercyclical.
Correct Answer:
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