The key difference between new classical cycle theory and new Keynesian cycle theory is that the new classical cycle theory believes that _______ while the new Keynesian cycle theory believes that _______.
A) expected and unexpected changes in aggregate demand change real GDP; only changes in labour productivity change aggregate demand
B) only unexpected changes in aggregate demand change real GDP; only expected changes in aggregate demand change real GDP
C) the short- run aggregate supply curve is horizontal; the short- run aggregate supply curve is vertical.
D) expected changes in aggregate demand change real GDP; expected changes in aggregate demand do not change real GDP
E) only unexpected changes in aggregate demand change real GDP; both expected and unexpected changes in aggregate demand change real GDP
Correct Answer:
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