The key concept in the new classical approach to the aggregate supply curve is
A)the impact of imperfect information on business decisions.
B)the impact of changes in the price level on real balances.
C)the inverse relationship between the real interest rate and desired investment spending.
D)the crowding out of investment spending by government spending.

Question

Quizplus · Accepted Answer

The new classical approach to the aggregate supply curve emphasizes the role of imperfect information on business decisions. This approach suggests that producers might confuse changes in the overall price level with changes in the prices of their individual products, leading to adjustments in production that influence the aggregate supply.

The Key Concept in the New Classical Approach to the Aggregate