The new classical model has the word classical associated with it because,when an increase in the money supply is anticipated,aggregate output
A)drops below the natural rate level.
B)rises above the natural rate level.
C)remains at the natural rate level.
D)increases in the short run,but not in the long run.

Question

Quizplus · Accepted Answer

The new classical model assumes that markets are always in equilibrium and any deviation from the natural rate level of output is temporary. Therefore, an increase in the money supply would not permanently shift the aggregate output level and it would remain at the natural rate level in the long run.

The New Classical Model Has the Word Classical Associated with It