According to new Keynesian theory,if policy is correctly anticipated,increases in aggregate demand will stimulate the economy to higher levels of Real GDP and lower levels of unemployment in

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According to new Keynesian theory, in the short run, an increase in aggregate demand can lead to an increase in Real GDP and a decrease in unemployment. However, in the long run, prices and wages adjust, and the economy returns to its natural rate of output and unemployment, making the effects of the policy temporary. If individuals and firms correctly anticipate the policy, they will adjust their expectations and take actions that offset the effects of the policy, making it less effective. Therefore, if policy is correctly anticipated, it will stimulate the economy in the short run but not in the long run.

According to New Keynesian Theory,if Policy Is Correctly Anticipated,increases in Aggregate