The factor that leads to business cycles in the new classical cycle theory is
A) unexpected changes in aggregate demand.
B) the growth rate of productivity.
C) expected changes aggregate demand.
D) the expected future sales and profits.

Question

Quizplus · Accepted Answer

According to the new classical cycle theory, business cycles are caused by unexpected changes in aggregate demand, which trigger changes in output, employment, and prices. These unexpected changes can result from shocks to the economy such as changes in fiscal or monetary policy, shifts in consumer preferences, or sudden changes in international trade. Other factors like the growth rate of productivity, expected changes in aggregate demand, and expected future sales and profits are not seen as primary drivers of business cycles in this theory.

The Factor That Leads to Business Cycles in the New