Multiple Choice
Two key assumptions of new Keynesian theory include:
A) (1) people hold rational expectations,and (2) wages and prices are not completely flexible in the short run.
B) (1) people hold adaptive expectations,and (2) wages and prices are inflexible.
C) (1) people hold rational expectations,and (2) wages and prices are flexible.
D) (1) people hold neither adaptive nor rational expectations and (2) prices are inflexible.
E) none of the above
Correct Answer:
Verified
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