What is the main difference between new Keynesian economics and monetarists?
A)Monetarists support a fixed-price model, whereas new Keynesians believe that prices fluctuate.
B)Monetarists reject the idea that government intervention can stabilize the economy, whereas new Keynesians support this notion.
C)Monetarists believe that the aggregate supply curve is always vertical, whereas new Keynesians believe that the aggregate supply curve is always horizontal.
D)Monetarists believe that an increase in the money supply changes real GDP instantaneously, whereas new Keynesians assume that economic policy operates with a long and variable lag.
E)Monetarists believe that deficit spending helps stimulate economic growth, whereas new Keynesians advocate a balanced budget.

Question

Quizplus · Accepted Answer

The main difference between new Keynesian economics and monetarists is their belief in government intervention. Monetarists reject the idea that government intervention can stabilize the economy, while new Keynesians support this notion. New Keynesians focus more on sticky prices and nominal rigidities, while monetarists focus on the quantity of money and its effects on the economy.

What Is the Main Difference Between New Keynesian Economics and Monetarists