According to the new classical macroeconomists,the only government policy changes that can have a substantial impact on output or employment are those that
A) are announced well in advance.
B) involve large budget deficits.
C) are discretionary, rather than adhering to a rule.
D) are unanticipated by businesses and households.
E) are designed to control wages and prices.

Question

Quizplus · Accepted Answer

According to new classical macroeconomists, government policy changes that are unanticipated by businesses and households can have a substantial impact on output or employment. This is because if people are caught off guard by a sudden policy change, their behavior and decisions may be affected in ways that can have a significant impact on the economy. Other options such as announcing policies well in advance or controlling wages and prices are not considered effective by new classical macroeconomists in influencing output or employment.

According to the New Classical Macroeconomists,the Only Government Policy Changes