In the coordination failure model,the 'bad' equilibrium is characterized by a
A) higher real interest rate and a higher price level than the 'good' equilibrium.
B) higher real interest rate and a lower price level than the 'good' equilibrium.
C) lower real interest rate and a higher price level than the 'good' equilibrium.
D) lower real interest rate and a lower price level than the 'good' equilibrium.
E) lower real interest rate and a lower aggregate output than the "good" equilibrium.

Question

Quizplus · Accepted Answer

In the coordination failure model, the 'bad' equilibrium is characterized by a higher real interest rate and a higher price level than the 'good' equilibrium. This is because in the 'bad' equilibrium, there is a lack of coordination between firms and workers, which leads to higher costs and prices.

In the Coordination Failure Model,the 'Bad' Equilibrium Is Characterized by a