The new classical theory argues that the primary factor leading to business cycles are
A) expected changes in aggregate demand.
B) expected changes in aggregate supply.
C) unexpected changes in aggregate supply.
D) unexpected changes in aggregate demand.

Question

Quizplus · Accepted Answer

The new classical theory emphasizes that unexpected changes in aggregate demand are the primary factor leading to business cycles, as these unexpected changes can lead to deviations from the natural level of output.

The New Classical Theory Argues That the Primary Factor Leading