According to the new classical macroeconomists,the gap between actual and potential output is a result of
A) perfectly inflexible wages and prices.
B) a horizontal short-run aggregate supply curve.
C) the inability to accurately estimate depreciation when measuring national output.
D) anticipated changes in the money supply.
E) random forecasting errors.

Question

Quizplus · Accepted Answer

New classical macroeconomists believe that gaps between actual and potential output are due to random forecasting errors, as they assume that markets clear and prices are flexible.

According to the New Classical Macroeconomists,the Gap Between Actual and Potential