In new classical economics, a "price-level surprise"
A) has no effect on the economy.
B) causes a temporary change in real output.
C) causes a permanent change in real output.
D) can never occur since people correctly anticipate the future.

Question

Quizplus · Accepted Answer

A "price-level surprise" in new classical economics leads to a temporary change in real output because it temporarily misleads producers about real prices, affecting supply decisions. Once expectations adjust, the economy returns to its natural level of output.

In New Classical Economics, a "Price-Level Surprise