Figure 28-9
-Refer to Figure 28-9. A follower of the new classical macroeconomics would argue that a contractionary monetary policy to lower inflation after a supply shock, like that pursued by Volcker in 1979, would result in a movement from

Question

Figure 28-9 
-Refer to Figure 28-9. A follower of the new classical macroeconomics would argue that a contractionary monetary policy to lower inflation after a supply shock, like that pursued by Volcker in 1979, would result in a movement from

Quizplus · Accepted Answer

A new classical macroeconomist would argue that a contractionary monetary policy would lead to a quick adjustment of expectations, resulting in a movement from C to A, where the economy returns to its natural level of output with lower inflation.

Figure 28-9 -Refer to Figure 28-9. a Follower of the New Classical