According to the new classical model,________.
A) unanticipated policy has no effect
B) only anticipated policy can influence the business cycle
C) anticipated policy has no effect on the business cycle
D) both A and B of the above are true

Question

Quizplus · Accepted Answer

In the new classical model, anticipated policy has no effect on the business cycle because individuals adjust their expectations and behaviors in advance, neutralizing the policy's impact. Unanticipated policy can have effects because it catches individuals off guard, preventing them from adjusting their expectations immediately.

According to the New Classical Model,________