In the new classical model,________.
A) a rise in the expected price level results in an immediate and equal rise in wages and prices
B) anticipated policy has no effect on aggregate output and unemployment
C) unanticipated policy has no effect on aggregate output and unemployment
D) Only A and B of the above

Question

Quizplus · Accepted Answer

In the new classical model, anticipated policy changes are already accounted for in people's expectations, so they do not affect output and unemployment. A rise in the expected price level leads to an immediate adjustment in wages and prices.

In the New Classical Model,________