According to the new classical view, aggregate output will differ from full-employment output
A)whenever saving does not equal investment.
B)only if the actual price level does not equal the expected price level.
C)only if the federal government's expenditures are greater than its tax receipts.
D)whenever imports exceed exports.

Question

Quizplus · Accepted Answer

According to the new classical view, markets are efficient and flexible, and the economy will automatically adjust to full-employment output in the long run. Therefore, the only reason for aggregate output to differ from full-employment output is if the actual price level does not equal the expected price level. In other words, if there are unanticipated changes in the price level, this can cause firms and households to change their behavior, leading to fluctuations in output and employment. The other options listed (A, C, and D) do not directly align with the new classical view regarding output determination.

According to the New Classical View, Aggregate Output Will Differ