Problem
1. How do new Keynesian ideas about expectations affect the IS and aggregate demand curves?
2. In the new Keynesian model, what shocks cause business cycle fluctuations? Does it matter whether these shocks are anticipated or unanticipated? Explain.
3. Compare the traditional Keynesian, new Keynesian, and real business cycle models in terms of expectations, price flexibility, and potential sources of business cycle fluctuations.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.