In the new classical macroeconomic model developed by Lucas and Sargent,expansionary macropolicies affect aggregate output
A)only when the macropolicy change is anticipated.
B)only when the macropolicy change is unanticipated.
C)only after a long and variable lag,provided the policy is anticipated.
D)relatively quickly,provided the policy is anticipated.

Question

Quizplus · Accepted Answer

In the new classical macroeconomic model, expansionary policies affect output only when they are unanticipated because agents form expectations rationally and adjust their behavior accordingly when policies are anticipated.

In the New Classical Macroeconomic Model Developed by Lucas and Sargent,expansionary