The new Keynesian cycle theory of the business cycle regards as the main source of economic fluctuations.
A) expected fluctuations in aggregate supply
B) unexpected fluctuations in aggregate demand
C) changes in business confidence
D) expected and unexpected fluctuations in aggregate demand

Question

Quizplus · Accepted Answer

The new Keynesian cycle theory suggests that both expected and unexpected fluctuations in aggregate demand lead to economic fluctuations. This is due to the presence of nominal rigidities, such as sticky prices and wages, which cause firms to adjust their production levels in response to changes in demand. Thus, fluctuations in aggregate demand, whether expected or unexpected, can have a significant impact on the business cycle.

The New Keynesian Cycle Theory of the Business Cycle Regards