What is the main difference between new Keynesian economists and monetarists?
A) Monetarists support a fixed-price model, whereas new Keynesians believe that prices fluctuate.
B) Monetarists reject the idea that government intervention can stabilize the economy, whereas new Keynesians support this notion.
C) Monetarists believe that the aggregate supply curve is always horizontal, whereas new Keynesians believe that the aggregate supply curve is always vertical.
D) Monetarists believe that an increase in the money supply changes real GDP instantaneously, whereas new Keynesians assume that economic policy operates with
A long and variable lag.
E) Monetarists believe that deficit spending helps stimulate economic growth, whereas new Keynesians advocate a balanced budget.

Question

Quizplus · Accepted Answer

The main difference between new Keynesian economists and monetarists is their belief in government intervention to stabilize the economy. Monetarists reject this idea and instead believe that the economy will naturally stabilize itself through market forces, specifically through control of the money supply. New Keynesians, on the other hand, support the notion of government intervention through fiscal and monetary policy to counteract economic fluctuations. Therefore, option B is correct. The other options show either incorrect or incomplete information that does not represent the main difference between these two schools of thought.

What Is the Main Difference Between New Keynesian Economists and Monetarists