The New Keynesian School Argues That Counting on Decreases in Prices

Multiple Choice

The new Keynesian school argues that counting on decreases in prices and wages to remove unemployment may be unwise because:

A) once prices and wages start to fall it is difficult to halt their decline.
B) there is no proven connection between the behavior of prices and wages.
C) the economy, if left alone, will automatically move to its full employment level of output.
D) sellers may find it more profitable to lower their outputs than their prices when demand is weak and unemployment is rising.