An expansionary monetary policy will cause aggregate output to expand in the non-activist macroeconomic model ________.
A) if the policy is unanticipated
B) if the policy is anticipated
C) only after a long and variable lag, provided the policy is anticipated
D) never; output will never expand in the non-activist model when monetary policy is changed

Question

Quizplus · Accepted Answer

An expansionary monetary policy will cause aggregate output to expand in the non-activist macroeconomic model if the policy is unanticipated. This is because unanticipated policy changes can temporarily affect real variables like output by catching economic agents off guard, altering their consumption and investment decisions before prices fully adjust.

An Expansionary Monetary Policy Will Cause Aggregate Output to Expand