The new classical approach to the aggregate supply curve assumes that businesses are
A)better informed about the general price level than they are about prices in their own markets.
B)better informed about prices in their own markets than they are about the general price level.
C)equally well informed about prices in their own markets and the general price level.
D)reluctant to engage in investment spending because of a lack of information concerning future prices.

Question

Quizplus · Accepted Answer

The new classical approach assumes that businesses have more information about prices in their own markets than they do about the general price level. This is because businesses are assumed to have imperfect information and may not have access to all the information they need to accurately predict future prices in the overall economy. As a result, businesses are more likely to base their production decisions on the prices they see in their own markets rather than the general price level.

The New Classical Approach to the Aggregate Supply Curve Assumes