Like the new classical model,the new Keynesian model
A)concludes that anticipated policies do not affect aggregate output and unemployment.
B)distinguishes between the effects of anticipated versus unanticipated policy,with anticipated policy having a greater effect.
C)distinguishes between the effects of anticipated versus unanticipated policy,with unanticipated policy having a greater effect.
D)assumes that wages and prices are perfectly flexible with respect to changes in the expected price level.

Question

Quizplus · Accepted Answer

The new Keynesian model suggests that unanticipated policy changes have a greater effect on output and unemployment due to price and wage stickiness, unlike anticipated policies which are often already factored into economic decisions.

Like the New Classical Model,the New Keynesian Model