It is the ________ assumption of ________ that allows for the transmission between nominal and real interest rates.
A) new Keynesian; sticky prices
B) monetarist; sticky prices
C) new Keynesian; perfect markets
D) Bank of Canada; chartered banks allegiance to Canadian monetary policy

Question

Quizplus · Accepted Answer

The new Keynesian assumption of sticky prices allows for the transmission between nominal and real interest rates, unlike the monetarist assumption that nominal interest rates directly affect real interest rates. The Bank of Canada and chartered banks allegiance to Canadian monetary policy are not relevant to the transmission between nominal and real interest rates.

It Is the ________ Assumption of ________ That Allows for the Transmission

It Is the Assumption of That Allows for the Transmission