Which of the following is the correct expression for short-run aggregate supply in the new classical view? A)Y = Y + a(P - P^e) B)Y = Y + a(P - P^e) C)Y = Y + a(P + P^e) D)Y = Y + a(P + P^e)

Question

Quizplus · Accepted Answer

According to the new classical view, short-run aggregate supply is determined by the level of potential output (Y) and the level of prices (P) relative to the expected price level (P^e), with a parameter "a" representing the elasticity of output with respect to prices. Therefore, the correct expression is Y = Y + a(P - P^e).

Which of the Following Is the Correct Expression for Short-Run