Refer to the information provided in Figure 32.2 below to answer the question(s) that follow. Figure 32.2 -Refer to Figure 32.2. According to the new classical economists, under rational expectations an expected decrease in taxes would A) shift AS₁ to the right. B) shift AD₁ to the right. C) shift AD₁ to the left. D) not change AD or AS.

Question

Quizplus · Accepted Answer

New classical economists argue that under rational expectations, anticipated policy changes, such as an expected decrease in taxes, are already accounted for by individuals and firms, leading to no change in aggregate demand (AD) or aggregate supply (AS).

Refer to the Information Provided in Figure 32