Consider two alternative worlds: (i) the world works according the rea

Consider two alternative worlds: (i) the world works according the real business cycle model, and the central bank acts to stabilize the price level; (ii) the world works according to the New Keynesian sticky price model, and the central bank acts to

make the output gap zero. Which is correct? A) We would prefer to live in world (ii).
B) We would prefer to live in world (i).
C) The data cannot tell us whether we are living in world (i) or world (ii).
D) in either world, the central bank is irrelevant.

ANSWER

A