One of the arguments supporting new classical theory is the policy ineffectiveness proposition (PIP).

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The policy ineffectiveness proposition (PIP) is a key argument of the new classical theory, which suggests that changes in monetary policy will have no effect on output and employment in the long run, as they will be offset by changes in expectations and prices. This view challenges the traditional Keynesian notion that changes in policy can have a real impact on the economy. Therefore, the statement is true.

One of the Arguments Supporting New Classical Theory Is the Policy