Which of the following accurately describes the new classical view of stabilization policy?
A)Changes in monetary policy do not affect output in the short run.
B)Policy changes which are unexpected are likely to introduce substantial uncertainty in household and business decisionmaking, causing output to become more volatile.
C)There's no need for stabilization policy since the economy operates at its full-employment level in the short run.
D)Rational expectations negates any effect of stabilization policy.

Question

Quizplus · Accepted Answer

The new classical view suggests that unexpected policy changes can introduce uncertainty, affecting decision-making and causing output volatility.

Which of the Following Accurately Describes the New Classical View