The New Keynesian model,is Keynesian in that ________.
A)it assumes wages and prices are sticky
B)changes in the money supply are taken to be the single most important influence on business movements
C)the velocity of money is a constant
D)expectations are assumed to be rational

Question

Quizplus · Accepted Answer

The New Keynesian model is Keynesian in that it assumes wages and prices are sticky, meaning they do not adjust instantly to changes in supply and demand. This leads to market inefficiencies and the potential for government intervention to stimulate demand and stabilize the economy. B is incorrect because the New Keynesian model emphasizes the importance of both monetary and fiscal policy in stabilizing the economy. C is incorrect because the velocity of money is not assumed to be constant in the New Keynesian model. D is partially correct as the New Keynesian model assumes that economic agents have rational expectations, but this is not the only defining characteristic of the model.

The New Keynesian Model,is Keynesian in That ________