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The New Keynesian Macroeconomics

This quiz covers the fundamental concepts and theories of the New Keynesian Macroeconomics, a modern school of thought in macroeconomics that emphasizes the role of sticky prices and wages in explaining economic fluctuations.

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Questions

Question 1 Multiple Choice (Single Answer)

Which of the following is a key assumption of the New Keynesian macroeconomic model?

  1. Prices and wages are perfectly flexible.
  2. Prices and wages are sticky in the short run.
  3. The economy is always at full employment.
  4. The Phillips curve is vertical in the long run.
Question 2 Multiple Choice (Single Answer)

What is the main reason for sticky prices and wages in the New Keynesian model?

  1. Menu costs.
  2. Information costs.
  3. Contracting costs.
  4. All of the above.
Question 3 Multiple Choice (Single Answer)

How do sticky prices and wages affect the Phillips curve in the New Keynesian model?

  1. They make the Phillips curve steeper.
  2. They make the Phillips curve flatter.
  3. They make the Phillips curve vertical.
  4. They make the Phillips curve horizontal.
Question 4 Multiple Choice (Single Answer)

What is the main policy implication of the New Keynesian model?

  1. Monetary policy should be used to stabilize the economy.
  2. Fiscal policy should be used to stabilize the economy.
  3. Both monetary and fiscal policy should be used to stabilize the economy.
  4. Government intervention in the economy should be minimized.
Question 5 Multiple Choice (Single Answer)

Which of the following is a key criticism of the New Keynesian model?

  1. It is too complex and unrealistic.
  2. It does not take into account the role of expectations.
  3. It is not supported by empirical evidence.
  4. All of the above.
Question 6 Multiple Choice (Single Answer)

Which New Keynesian economist developed the concept of the 'liquidity trap'?

  1. John Maynard Keynes
  2. Paul Krugman
  3. Olivier Blanchard
  4. Stanley Fischer
Question 7 Multiple Choice (Single Answer)

What is the main idea behind the 'liquidity trap'?

  1. Interest rates cannot fall below zero.
  2. Banks are unwilling to lend money even at low interest rates.
  3. Consumers and businesses are unwilling to spend money even at low interest rates.
  4. All of the above.
Question 8 Multiple Choice (Single Answer)

Which New Keynesian economist developed the concept of the 'New Phillips Curve'?

  1. A.W. Phillips
  2. Milton Friedman
  3. Robert Lucas
  4. Edmund Phelps
Question 9 Multiple Choice (Single Answer)

What is the main difference between the 'New Phillips Curve' and the traditional Phillips Curve?

  1. The 'New Phillips Curve' is steeper.
  2. The 'New Phillips Curve' is flatter.
  3. The 'New Phillips Curve' is vertical in the long run.
  4. The 'New Phillips Curve' is horizontal in the long run.
Question 10 Multiple Choice (Single Answer)

Which New Keynesian economist developed the concept of the 'sticky information' model?

  1. George Akerlof
  2. Janet Yellen
  3. Ben Bernanke
  4. Mark Gertler
Question 11 Multiple Choice (Single Answer)

What is the main idea behind the 'sticky information' model?

  1. Consumers and businesses do not have perfect information about the economy.
  2. Consumers and businesses do not have perfect information about each other.
  3. Consumers and businesses do not have perfect information about the future.
  4. All of the above.
Question 12 Multiple Choice (Single Answer)

Which New Keynesian economist developed the concept of the 'menu cost' model?

  1. Stanley Fischer
  2. Olivier Blanchard
  3. John Taylor
  4. Michael Woodford
Question 13 Multiple Choice (Single Answer)

What is the main idea behind the 'menu cost' model?

  1. Firms incur costs when they change prices.
  2. Consumers incur costs when they search for the best prices.
  3. Both firms and consumers incur costs when prices change.
  4. None of the above.
Question 14 Multiple Choice (Single Answer)

Which New Keynesian economist developed the concept of the 'contracting cost' model?

  1. Paul Krugman
  2. Robert Lucas
  3. Thomas Sargent
  4. Neil Wallace
Question 15 Multiple Choice (Single Answer)

What is the main idea behind the 'contracting cost' model?

  1. Firms and workers incur costs when they negotiate and enforce contracts.
  2. Consumers and businesses incur costs when they negotiate and enforce contracts.
  3. Both firms and consumers incur costs when they negotiate and enforce contracts.
  4. None of the above.
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