New classical economists argue that unless people are taken by surprise, a decrease in aggregate demand will cause

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New classical economists argue that prices are flexible and adjust quickly to changes in demand. Therefore, a decrease in aggregate demand will cause a decrease in prices, but it will not affect employment. This is because firms will adjust their production levels in response to the decrease in demand and reduce their prices to clear their inventory. As a result, there will be no change in employment because firms will not need to lay off workers to compensate for the decrease in demand.

New Classical Economists Argue That Unless People Are Taken by Surprise