New classical economics:
A) focuses on short-run economic fluctuations.
B) returns to the view that shifts in aggregate demand affect only the price level.
C) argues that the business cycle is caused by "animal spirits."
D) focuses on the trade-off between unemployment and inflation.

Question

Quizplus · Accepted Answer

New classical economics believes that shifts in aggregate demand only affect the price level, as opposed to affecting output and employment in the short run. They argue that the economy will always return to its natural rate of output and unemployment in the long run, regardless of short-term fluctuations. This is known as the "neutrality of money" and is a key feature of new classical economics.

New Classical Economics