According to the new classical model, an increase or decrease in aggregate demand would affect the level of prices, but never the level of output in the:
A) long run.
B) short run.
C) long run and short run.
D) not enough information to answer the question.

Question

Quizplus · Accepted Answer

In the new classical model, it is posited that in the long run, the economy is always at its natural level of output, regardless of the level of prices. This means that any changes in aggregate demand would only affect prices, not the output level, due to the flexibility of wages and prices in the long run.

According to the New Classical Model, an Increase or Decrease