Those who believe in the classical model suggest that expansionary policies would result in:
A)increases in output and the aggregate price level.
B)increases in output with no change in the aggregate price level.
C)increases in the aggregate price level with no change in output.
D)increases in unemployment and the output level.

Question

Quizplus · Accepted Answer

The classical model posits that the economy is always at full employment due to flexible prices and wages. Therefore, expansionary policies would only lead to increases in the aggregate price level, not output.

Those Who Believe in the Classical Model Suggest That Expansionary