Multiple Choice
If the central bank in a New Keynesian model can always reduce the output gap to zero,
A) the price level will be countercyclical.
B) the price level will be procyclical.
C) investment will be procyclical if there are total factor productivity shocks.
D) consumption will be countercyclical if there are total factor productivity shocks.
E) this would be inefficient.
Correct Answer:
Verified
Correct Answer:
Verified
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