Which of the following is a characteristic of the 'New Keynesian' Phillips Curve?
A. It is based on adaptive expectations only
B. It assumes continuous market clearing
C. It incorporates forward-looking expectations and sticky prices
D. It denies any role for demand factors
Answer: Option C
Solution (By JKSSB Mock Tests)
The New Keynesian Phillips Curve is derived from models with staggered price setting and rational expectations, linking current inflation to expected future inflation and the output gap or marginal cost.
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