New Keynesian theorists argue that
A) price and wage adjustments in response to policy changes often overcompensate and cause further price disruptions.
B) prices and wages may not be free to adjust in response to policy changes.
C) unions and big business have considerable power and often choose not to change wages and prices so as to deliberately offset policy changes enacted by the government.
D) the Fed and the Congress rarely do what they say they will do, so one should never listen to what they say.
E) new classical rational expectations theories about how expectations are formed are completely wrong.
B
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What assets are included in M1? In M2? Is all of M1 and M2 money? If some assets of M1 or M2 are not money, why are they included in M1 or M2?
What will be an ideal response?
To determine how much of a good to produce to achieve allocative efficiency, we
A) construct a production possibilities frontier and choose the midpoint. B) construct a production possibilities frontier and choose any point on it. C) must produce on the PPF and at the point where the marginal benefit and marginal cost of the good are equal. D) must produce on the PPF and at the point where the marginal benefit exceeds by any amount the marginal cost of the good. E) must produce on the PPF and at the point where the marginal benefit exceeds by as much as possible the marginal cost of the good.