New Keynesian economics assumes rational expectations and
A) sticky prices and wages.
B) flexible prices and wages.
C) flexible prices, but sticky wages.
D) flexible wages, but sticky prices.

Question

Quizplus · Accepted Answer

New Keynesian economics assumes rational expectations and sticky prices and wages. This means that prices and wages do not adjust instantly to changes in supply and demand, which can result in short-term fluctuations in the economy. Rational expectations, on the other hand, assume that people make decisions based on all available information and that they form accurate expectations of future market conditions.

New Keynesian Economics Assumes Rational Expectations and