The new classical model implies that a shift to a more expansionary fiscal policy will

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According to the new classical model, changes in fiscal policy (i.e. government spending or taxation) do not have a significant impact on aggregate demand and employment. This is because individuals and firms are forward-looking and will adjust their behavior based on their expectations of future policy changes, making any short-term effects of fiscal policy temporary and ultimately offsetting. Therefore, a shift to a more expansionary fiscal policy will have little or no impact on the real interest rate, aggregate demand, and employment, as individuals and firms will anticipate the future consequences of such a policy shift and adjust their behavior accordingly.

The New Classical Model Implies That a Shift to a More