Assume the Bank of Canada initiates an expansionary monetary policy that is correctly anticipated by economic agents in the economy.According to the new classical model,the result is

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The new classical model suggests that there is no long-run trade-off between inflation and unemployment, meaning that the expansionary monetary policy will only result in increased prices but no change in real output or real national income in the long run. This is because economic agents will adjust their behavior and expectations in response to the policy, leading to a reduction in the effectiveness of monetary policy over time.

Assume the Bank of Canada Initiates an Expansionary Monetary Policy