In the new classical model,
A)wages and prices are sticky with respect to expected changes in the price level.
B)a rise in the expected price level results in an immediate and equal rise in wages and prices.
C)an anticipated increase in the money supply will increase aggregate output temporarily.
D)unanticipated policy has no effect on aggregate output and unemployment.

Question

Quizplus · Accepted Answer

In the new classical model, wages and prices are flexible and adjust immediately to changes in the expected price level, leading to an immediate and equal rise in wages and prices when the expected price level increases.

In the New Classical Model