Both the New Classical and New Keynesian Business Cycle Theories

question 103

Multiple Choice

Both the new classical and new Keynesian business cycle theories agree that

• A) expected changes in aggregate demand lead to the business cycle.
• B) unexpected changes in aggregate demand cannot result in a business cycle.
• C) the money wage rate is influenced by rational expectations of the price level.
• D) the long-term nature of wage contracts allow expected changes in the price level to cause business cycles.