In the new Keynesian model,if an aggregate demand increase is unanticipated,then ________.
A)aggregate demand will not change
B)short-run aggregate supply will shift up immediately
C)short-run aggregate supply will shift down immediately
D)there is no immediate effect on expectations about future inflation

Question

Quizplus · Accepted Answer

In the new Keynesian model, if an aggregate demand increase is unanticipated, there is no immediate effect on expectations about future inflation because expectations adjust over time, not instantaneously.

In the New Keynesian Model,if an Aggregate Demand Increase Is