A primary difference between the original and New Keynesian approaches is that in the original model nominal wages are ________, while for the New Keynesians nominal wages are ________
A) perfectly flexible, slow to adjust
B) slow to adjust, perfectly flexible
C) fixed, slow to adjust
D) slow to adjust, fixed
C
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For countries with high seigniorage returns, we expect
A) PPP holding better. B) a high and variable inflation rate. C) a smaller role for their currencies as an international store of value. D) All of the above.
If firms are successful in product differentiation:
a. their demand will become relatively elastic. b. consumers will believe that the firms are producing more or less identical goods. c. they can raise their prices without losing all of their customers to rivals. d. they tend to face a horizontal demand curve. e. they gradually emerge as price takers.
The adjustment of nominal incomes to changes in the price level (CPI) is fixed because of the:
a. complete information possessed by workers. b. volatility of investment spending. c. existence of long-term contracts. d. all of these choices.
The situation in which the central bank increases the money supply, but the money multiplier falls enough to offset increases in reserves is known as a:
A. reserve trap. B. interest rate trap. C. Fed trap. D. liquidity trap.