In the new Keynesian model,expected inflation is a function of ________.
A)expected future output gaps and markup shocks
B)current and past inflation
C)unanticipated aggregate demand shocks
D)expected growth of the money supply

Question

Quizplus · Accepted Answer

In the new Keynesian model, expected inflation is determined by the expected future output gaps and markup shocks. This is because firms adjust their prices based on their expectations of future demand and costs, which are influenced by these factors. Current and past inflation levels, unanticipated aggregate demand shocks, and expected growth of the money supply may also have some effect on expected inflation, but they are not the primary determinants in this model.

In the New Keynesian Model,expected Inflation Is a Function of ________