New Keynesian economics
A) favor stabilization policies that shift the short-run aggregate supply curve to keep the economy operating close to its potential output.
B) advocates policies that increase wage and price flexibility so that the economy can self-correct quickly.
C) stresses the stickiness of prices and the need for activist stabilization policies through the aggregate demand management policies to move the economy to its potential output.
D) stresses the importance of operating at potential output and with shifting the long-run aggregate supply curve to the right.

Question

Quizplus · Accepted Answer

New Keynesian economics stresses the stickiness of prices and wages in the short run and favors the use of stabilization policies to manage aggregate demand and keep the economy operating close to its potential output. This is because they believe that the economy may not always operate at its potential output due to market inefficiencies and that activist policies are needed to counteract these inefficiencies.

New Keynesian Economics