In the basic New Keynesian model, if the central bank is initially achieving its goals, and the natural rate of interest rises, the central bank should A. increase the nominal interest rate by the amount of the natural real interest rate increase. B. reduce the nominal interest rate by the amount of the natural real interest rate increase. C. increase the nominal interest rate by less than the amount of the natural real rate of interest increase. D. reduce the nominal interest rate by less than the amount of the natural real interest rate increase. E. do nothing
In the basic New Keynesian model, if the central bank is initially achieving its goals, and the natural rate of interest rises, the central bank should A. increase the nominal interest rate by the amount of the natural real interest rate increase. B. reduce the nominal interest rate by the amount of the natural real interest rate increase. C. increase the nominal interest rate by less than the amount of the natural real rate of interest increase. D. reduce the nominal interest rate by less than the amount of the natural real interest rate increase. E. do nothing
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter25: The Keynesian Perspective
Section: Chapter Questions
Problem 1SCQ: In the Keynesian framework, which of the following events might cause a recession? Which might cause...
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In the basic New Keynesian model, if the central bank is initially achieving its goals, and the natural rate of interest rises, the central bank should
increase the nominal interest rate by the amount of the natural real interest rate increase.
reduce the nominal interest rate by the amount of the natural real interest rate increase.
increase the nominal interest rate by less than the amount of the natural real rate of interest increase.
reduce the nominal interest rate by less than the amount of the natural real interest rate increase.
do nothing
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