In a new Keynesian model a temporary increase in output could be cause by:

Question

Quizplus · Accepted Answer

In a new Keynesian model, a positive shock to government purchases, such as an increase in government spending, can lead to a temporary increase in output. A negative monetary surprise or households becoming less thrifty would not necessarily cause an immediate increase in output in the short run, as the impact of these factors would have to be transmitted through the economy before the effects on output are observed.

In a New Keynesian Model a Temporary Increase in Output