This innovative book shows how new Keynesian economics has reacted to the challenges of new classical economics. It argues that new Keynesian economists have responded positively to the challenge and strengthened the analytical power of their models.

In this paper we analyze the effects of adverse selection due to asymmetric information on the optimizing behavior of risk neutral firms and banks in a competitive loan market. Realized film returns have the monotone likelihood ratio property (MLRP) with respect to quality, in the sense of...