What Does the Coefficient a in the New Classical Expression

question 42

Multiple Choice

What does the coefficient a in the new classical expression for short-run aggregate supply represent?

• A) the full employment level of output
• B) the price level in the previous period
• C) how much output responds when the actual price level differs from the expected price level
• D) how much the price level responds when the actual level of output differs from the full-employment level of output

---

Definitions:

Novation

The act of replacing an existing obligation with a new one, effectively transferring the rights and duties to a third party.

Liquidated Damages

A contractual provision that determines in advance the amount of damages to be paid if a party breaches the contract.

Breaching Party

The party in a contract who fails to fulfill their contractual obligations, thereby violating the agreement.

Objective Impossibility

A situation where it is not possible to carry out a contract's obligations due to uncontrollable external circumstances.