New Keynesian Theorists Argue That

Multiple Choice

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.