Which of the following statements is (are) correct? The new classical economics
a. questions the soundness of the Keynesian model, arguing that many of its relationships are not firmly based on individual optimizing behavior.
b. criticizes what it considers arbitrary assumptions of Keynesians concerning wage stickiness and consequent involuntary unemployment.
c. favors the rational expectations assumptions over formulations that assume that individuals form price expectations on the basis of past history of prices because the rational expectations hypothesis is consistent with individual optimizing behavior.
d. All of the above
e. None of the above
Question 2
In the real intertemporal model, an adverse sectoral shock acts to
A) reduce real output and reduce the real interest rate.
B) increase real output and increase the real interest rate.
C) increase real output and reduce the real interest rate.
D) reduce real output and increase the real interest rate.
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