According to the new classical view, when the actual price level is greater than the expected price level
A)aggregate output is above the full employment level.
B)aggregate output is below the full employment level.
C)the aggregate supply curve will slope downward.
D)the coefficient a is equal to zero.

Question

Quizplus · Accepted Answer

When the actual price level is greater than the expected price level, firms perceive the relative price of their products to be higher, which incentivizes them to increase production. This leads to aggregate output being above the full employment level, as firms temporarily produce more than they would at the equilibrium full employment output.

According to the New Classical View, When the Actual Price