According to the new Keynesian cycle theory of the business cycle, which of the following can trigger a business cycle expansion?
I. an unexpected increase in the quantity of money
II. an expected increase in the quantity of money
III. an expected increase in government expenditure
A) I, II and III
B) I only
C) II and III
D) None of the three will trigger an expansion.

Question

Quizplus · Accepted Answer

New Keynesian cycle theory suggests that both unexpected and expected increases in the quantity of money, as well as expected increases in government expenditure, can stimulate demand and trigger a business cycle expansion.

According to the New Keynesian Cycle Theory of the Business