The new classical cycle theory predicts that an unexpected increase in aggregate demand__________ create a business cycle and an expected increase in aggregate demand__________ create a business cycle.
A) will; will not
B) will; will
C) will not; will
D) will not; will not

Question

Quizplus · Accepted Answer

The new classical cycle theory suggests that only unexpected changes in aggregate demand can create business cycles, as expected changes are already accounted for by rational agents.

The New Classical Cycle Theory Predicts That an Unexpected Increase