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In the new classical model, ____.
A) wages and prices are sticky with respect to expected changes in the price level
B) a rise in the expected price level results in an immediate and equal rise in wages and prices
C) an anticipated increase in the money supply will increase aggregate output temporarily
D) unanticipated policy has no effect on aggregate output and unemployment
Answer: B
Diff: 1 Type: MC Page Ref: 695
Skill: Recall
Objective List: 25.1 Discern between activist and non-activists views on monetary policy
In the new classical model, ____.
A) a rise in the expected price level results in an immediate and equal rise in wages and prices
B) anticipated policy has no effect on aggregate output and unemployment
C) unanticipated policy has no effect on aggregate output and unemployment
D) Only A and B of the above
Answer: D
Diff: 1 Type: MC Page Ref: 695
Skill: Recall
Objective List: 25.1 Discern between activist and non-activists views on monetary policy
In the new classical model, an expansionary monetary policy causes ____.
A) the aggregate demand curve to shift to the right, and output to increase only if the policy is
anticipated
B) the aggregate demand curve to shift to the right, and output to increase only if the policy is
unanticipated
C) a decline in the price level
D) both B and C of the above
Answer: B
Diff: 1 Type: MC Page Ref: 695
Skill: Recall
Objective List: 25.1 Discern between activist and non-activists views on monetary policy
If all wages and prices are perfectly flexible with respect to expected changes in the price
level, then an expansionary monetary policy will cause ____.
A) the aggregate demand curve to shift to the right, and output to increase only if the policy is
anticipated
B) the aggregate demand curve to shift to the right, and output to increase only if the policy is
unanticipated
C) an increase in the price level
D) both B and C of the above
Answer: D
Diff: 1 Type: MC Page Ref: 695
Skill: Recall
Objective List: 25.1 Discern between activist and non-activists views on monetary policy