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:

Wages

Payment to resource owners for their labor.

Externality

A consequence of an economic activity experienced by unrelated third parties; it can be either positive or negative.

Precision-estimates

The accuracy of an estimate in terms of how closely it predicts the actual value, often relevant in statistical analyses and forecasting.

Opportunity Cost

The loss of potential gain from other alternatives when one alternative is chosen.