According to the New Keynesian Model, After a Negative Shock

Multiple Choice

According to the New Keynesian model, after a negative shock to output

A) the government increases expenditures and the central bank increases its target rate.
B) the government decreases expenditures and the central bank decreases its target rate.
C) the government decreases expenditures and the central bank increases its target rate.
D) the government leaves expenditures unchanged and the central bank increases its target rate.
E) the government increases expenditures and the central bank decreases its target rate.