Which of the Following Correctly Describes the New Classical Cycle

question 387

Multiple Choice

Which of the following correctly describes the new classical cycle theory of the business cycle?

• A) An expected tax rate change can trigger a business cycle.
• B) An expected change in the level of exports can trigger a business cycle.
• C) Rational expectations keep the money wage from changing quickly.
• D) An unexpected change in the quantity of money can trigger a business cycle.

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Definitions:

Demand

It represents the quantity of a good or service that consumers are willing and able to purchase at various prices.

Supply

The total amount of a product or service that is available to consumers.

Elastic

Describes a situation where the demand for a good or service significantly changes in response to a change in price.

Optimal Tax

A taxation principle aiming to maximize economic efficiency without imposing undue burdens or distortions.