In the new classical model,an expansionary monetary policy causes ________.
A) the aggregate demand curve to shift to the right, and output to increase only if the policy is anticipated
B) the aggregate demand curve to shift to the right, and output to increase only if the policy is unanticipated
C) a decline in the price level
D) both B and C of the above

Question

Quizplus · Accepted Answer

In the new classical model, an expansionary monetary policy affects output only if it is unanticipated, as anticipated policies are already factored into expectations and do not change real variables.

In the New Classical Model,an Expansionary Monetary Policy Causes ________