In the New Classical Model, ________

question 84

Multiple Choice

In the new classical model, ________.

• A) wages and prices are sticky with respect to expected changes in the price level
• B) unanticipated policy has no effect on aggregate output and unemployment
• C) an anticipated increase in the money supply will increase aggregate output temporarily
• D) only unanticipated policy can affect aggregate output and unemployment

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Definitions:

Surplus

The excess of a good or service that occurs when the quantity supplied exceeds the quantity demanded; surpluses occur when the price is above the equilibrium price.

Price Elasticity of Demand

A measure of how much the quantity demanded of a good responds to a change in the price of that good, indicative of the product's sensitivity to price changes.

Availability of Substitutes

The presence of alternative goods or services that consumers can switch to when prices rise or quality decreases, affecting market demand and competition.

Bus Service

A public or private system offering regular travel on established routes by buses for the transportation of individuals.