An expansionary monetary policy will cause aggregate output to expand in the new classical 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 new classical model when monetary policy is changed.

Question

Quizplus · Accepted Answer

In the new classical macroeconomic model, only unanticipated monetary policy can affect real variables like output, as anticipated policy changes are already factored into expectations and prices.

An Expansionary Monetary Policy Will Cause Aggregate Output to Expand