Which of the following is true from the perspective of the New Keynesian school of thought?
a. Fluctuations in private spending does not affect aggregate demand in an economy.
b. Investment spending remains relatively constant irrespective of the supply shocks.
c. Fluctuations in aggregate demand are not the primary source of problem for policymakers.
d. The government should limit its role to administrative functions.
e. Monetary and fiscal policies often fail to restore macroeconomic equilibrium.
Question 2
If the demand curve for a product was vertical, then the elasticity of demand would be:
a. equal to zero.
b. equal to one.
c. greater than one, but less than infinity.
d. equal to infinity.
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