In the new classical model, all wages and prices ________.
A) are completely flexible with respect to expected changes in the price level
B) are fixed with respect to expected changes in the price level
C) are flexible with respect to the value of the dollar
D) are fixed with respect to the money supply
Question 2
The liquidity preference theory ________.
A) distinguishes between nominal and real quantities
B) shows that demand for real balances depends on real income
C) shows that demand for real balances depends on the nominal interest rate
D) all of the above
E) none of the above
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Charles and Ray Eames, Side Chair, Model DCM.
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