Which of the following is TRUE regarding the new classical view of the business cycle?
A) Long- term contracts cause the money wage rate to be sticky.
B) If firms and workers anticipate an increase in aggregate demand, money wages can be adjusted.
C) If firms and workers expect the quantity of money to increase, aggregate demand will decrease.
D) Long- term contracts cause business cycles.

Question

Quizplus · Accepted Answer

The new classical view suggests that if firms and workers anticipate changes in aggregate demand, they can adjust money wages accordingly, which implies flexibility in wages rather than stickiness.

Which of the Following Is TRUE Regarding the New Classical