Credibility is not important in ________.
A)new Keynesian and traditional Keynesian theory
B)real business cycle and traditional Keynesian theory
C)real business cycle and new Keynesian theory
D)traditional Keynesian,new Keynesian and real business cycle theory

Question

Quizplus · Accepted Answer

Credibility is particularly important in monetary and fiscal policy, which are central to New Keynesian and traditional Keynesian theories. Real Business Cycle (RBC) theory, on the other hand, largely ignores the role of policy credibility, focusing instead on real (supply-side) shocks to explain economic fluctuations. Traditional Keynesian theory also emphasizes demand-side factors, making credibility less central in RBC theory compared to the others.

Credibility Is Not Important in ________