The short-run response to an anticipated expansionary policy in the new classical model includes ________ in the price level and ________ in aggregate output.
A)an increase; an increase
B)an increase; no change
C)no change; an increase
D)no change; no change

Question

Quizplus · Accepted Answer

In the new classical model, anticipated policy changes are fully expected by rational agents, leading to adjustments in prices but not in output, as output is determined by real factors, not nominal ones.

The Short-Run Response to an Anticipated Expansionary Policy in the New