Which of the following is a characteristic of the 'New Keynesian' Phillips Curve?
A. It is based on adaptive expectations only
B. It incorporates forward-looking expectations and sticky prices
C. It denies any role for demand factors
D. It assumes continuous market clearing
Answer: Option B
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.
Explanation:
The simple Keynesian consumption function states that current consumption depends primarily on current disposable income, with a positive marginal propensity to consume less than one.
Explanation:
The expansion of IT and ITES, financial services, trade and tourism, supported by liberalisation and rising incomes, has driven the rapid growth of India's service sector.
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