Both new Keynesian and new classical cycle theories claim that __________.
A) expected changes in the quantity of money can trigger a business cycle
B) unexpected changes in aggregate demand trigger a business cycle
C) shifts in the SAS curve are the main impulse for a business cycle
D) animal spirits can trigger a business cycle

Question

Quizplus · Accepted Answer

Both new Keynesian and new classical cycle theories emphasize the role of unexpected changes in aggregate demand in triggering a business cycle. New Keynesian theory also focuses on the role of imperfect information and sticky prices and wages, while new classical theory emphasizes the role of rational expectations and flexible prices and wages.

Both New Keynesian and New Classical Cycle Theories Claim That