Which theory distinguishes between expected and unexpected fluctuations in aggregate demand and asserts that only unexpected changes can affect real GDP?
A) new classical cycle theory
B) monetarist cycle theory
C) Keynesian cycle theory
D) real business cycle theory

Question

Quizplus · Accepted Answer

The new classical cycle theory distinguishes between expected and unexpected fluctuations in aggregate demand and asserts that only unexpected changes can affect real GDP. This theory proposes that individuals have rational expectations and adjust their behavior accordingly in response to changes in aggregate demand, making it difficult for policymakers to affect real GDP through monetary or fiscal policy.

Which Theory Distinguishes Between Expected and Unexpected Fluctuations in Aggregate