-In the New Classical Model in the Figure Above, the Long-Run

question 26

Multiple Choice

-In the new classical model in the figure above, the long-run effect of an unanticipated monetary expansion ________.

• A) increases output from Y_n to Y₂, and the inflation rate from P₁ to P₂
• B) decreases output from Y_n to Y₄, and the inflation rate from P₃ to P₄
• C) does not change output and increases the inflation rate from P₁ to P₃
• D) does not change output and decreases the inflation rate from P₃ to P₁

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