The main difference between the New Keynesian model and the basic monetary intertemporal model is that in the New Keynesian model
A)menu costs are insignificant.
B)the price level is sticky in the short run.
C)firms are backward-looking.
D)wages are sticky in the short run.
E)prices adjust quickly to equate the supply and demand for goods.

Question

Quizplus · Accepted Answer

In the New Keynesian model, the price level is sticky in the short run, which means that prices do not adjust immediately to changes in supply and demand. This is in contrast to the basic monetary intertemporal model, where prices adjust quickly to equate the supply and demand for goods. The other options (A, C, D, and E) are not the main differences between the two models.

The Main Difference Between the New Keynesian Model and the Basic