Compared to the standard IS-LM model, the new Keynesian model implies that policy changes move equilibrium value in the same direction but at different magnitudes.

Question

Quizplus · Accepted Answer

The New Keynesian model incorporates elements like price stickiness and imperfect competition, which can alter the magnitude of policy impacts on equilibrium values compared to the standard IS-LM model, but the direction of the change remains consistent with traditional Keynesian theory.

Compared to the Standard IS-LM Model, the New Keynesian Model