In terms of the AD-AS model, the new classical approach indicates that an expected decrease in the money supply will not affect output because
A)neither the AD nor SRAS curve will be affected.
B)the AD curve will shift left, but the SRAS curve will not shift.
C)the SRAS curve will shift down, but the AD curve will not be affected.
D)the AD curve will shift left, and the SRAS will shift down by the same amount.

Question

Quizplus · Accepted Answer

In the new classical approach, expectations adjust quickly, so both AD and SRAS shift in response to changes in the money supply, leaving output unchanged.

In Terms of the AD-AS Model, the New Classical Approach