Which theory distinguishes between expected and unexpected fluctuations in aggregate demand and asserts that only unexpected changes can affect real GDP?
A) Keynesian cycle theory
B) real business cycle theory
C) monetarist cycle theory
D) new classical cycle theory

Question

Quizplus · Accepted Answer

The new classical cycle theory distinguishes between expected and unexpected fluctuations in aggregate demand and asserts that only unexpected changes can affect real GDP. The theory emphasizes the importance of rational expectations and flexible prices in the economy's response to changes in aggregate demand.

Which Theory Distinguishes Between Expected and Unexpected Fluctuations in Aggregate