In the New Keynesian model, if there is a decrease in anticipated futu

In the New Keynesian model, if there is a decrease in anticipated future total factor productivity, then

A) there should be no change in monetary or fiscal policy.
B) the central bank’s interest rate target should be increased.
C) government spending should fall, and the central bank’s interest rate target should rise.
D) government spending should increase.

ANSWER

D