Exhibit 16-2

-Refer to Exhibit 16-2.Suppose the economy starts at point A.Fed monetary policy shifts the AD curve to AD₂.A rise in Real GDP is likely if the economy operates under __________ assumptions,such as wage and price __________.

Question

Exhibit 16-2
Exhibit 16-2 -Refer to Exhibit 16-2.Suppose the economy starts at point A.Fed monetary policy shifts the AD curve to AD<sub>2</sub>.A rise in Real GDP is likely if the economy operates under __________ assumptions,such as wage and price __________. A) new classical; flexibility B) new classical; inflexibilities C) new Keynesian; flexibility D) new Keynesian; inflexibilities

Exhibit 16-2 -Refer to Exhibit 16-2.Suppose the economy starts at point A.Fed monetary policy shifts the AD curve to AD<sub>2</sub>.A rise in Real GDP is likely if the economy operates under __________ assumptions,such as wage and price __________. A) new classical; flexibility B) new classical; inflexibilities C) new Keynesian; flexibility D) new Keynesian; inflexibilities

-Refer to Exhibit 16-2.Suppose the economy starts at point A.Fed monetary policy shifts the AD curve to AD₂.A rise in Real GDP is likely if the economy operates under __________ assumptions,such as wage and price __________.

Quizplus · Accepted Answer

Under new Keynesian assumptions, wage and price inflexibilities can lead to a rise in Real GDP when the AD curve shifts, as these inflexibilities prevent immediate adjustments, allowing for increased output.

Exhibit 16-2 -Refer to Exhibit 16-2.Suppose the Economy Starts at Point A.Fed