According to the new classical model, changes in aggregate demand change real GDP
A) all of the time.
B) only when the short-run aggregate supply curve is vertical.
C) only when the changes in aggregate demand are expected.
D) only when the changes in aggregate demand are unexpected.

Question

Quizplus · Accepted Answer

In the new classical model, only unexpected changes in aggregate demand can change real GDP because expected changes are already anticipated and adjusted for by economic agents, leaving no effect on real output.

According to the New Classical Model, Changes in Aggregate Demand