In the new Keynesian model, a positive, permanent supply shock ...

[dejastew]

In the new Keynesian model, a positive, permanent supply shock will result in ________.
 
  A) an increase in aggregate demand
  B) a decrease in aggregate demand
  C) no change in aggregate demand
  D) a change in aggregate demand, only if the shock is anticipated

Question 2

Including investment and production in the two-good, two-period model with trade
 
  A) allows the country to equalize absorption and output demand.
  B) renders terms of trade endogenous.
  C) allows the country to react to changes in the interest rate.
  D) allows the government to run budget deficits.

[Jody Vaughn]

Answer to Question 1

A

Answer to Question 2

C