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 only
B) II and III
C) I, II and III
D) None of the three will trigger an expansion.

Question

Quizplus · Accepted Answer

New Keynesian cycle theory suggests that both expected and unexpected increases in the quantity of money and expected increases in government expenditure can trigger a business cycle expansion. This is because these factors can influence aggregate demand, leading to changes in output and employment.

According to the New Keynesian Cycle Theory of the Business