According to the new classical view, if Fed policy during the early 1980s had been more credible,
A)the SRAS curve would have shifted less than it did.
B)the AD curve would have shifted less than it did.
C)output would have declined by less than it did.
D)the price level would have declined by more than it did.

Question

Quizplus · Accepted Answer

A credible Fed policy would have anchored inflation expectations, leading to smaller declines in output as people would have adjusted their behavior based on the anticipated policy outcomes.

According to the New Classical View, If Fed Policy During