Which of the following correctly describes the new classical cycle theory of the business cycle?
A) An unexpected change in the quantity of money can trigger a business cycle.
B) Rational expectations keep the money wage from changing quickly.
C) An expected change in the level of exports can trigger a business cycle.
D) An expected tax rate change can trigger a business cycle.

Question

Quizplus · Accepted Answer

The new classical cycle theory suggests that unexpected changes in the quantity of money can lead to business cycles due to their impact on real variables like output and employment.

Which of the Following Correctly Describes the New Classical Cycle