In the new classical model, an anticipated policy of a continually increasing money supply ________.
A) causes the aggregate demand curve to shift continually to the right
B) causes the aggregate demand curve to shift continually to the left
C) is shown as a movement along the aggregate demand curve
D) B and C only

Question

Quizplus · Accepted Answer

In the new classical model, an anticipated policy of a continually increasing money supply is expected to cause the aggregate demand curve to shift continually to the right. This is because an increase in the money supply, if anticipated, leads to expectations of higher future prices, which in turn encourages more spending now before prices go up, thus shifting the aggregate demand curve to the right.

In the New Classical Model, an Anticipated Policy of a Continually