-An important feature of the new classical model is that an expansionary policy, such as an increase in the rate of money growth, can lead to a decline in aggregate output ________.
A) if the public expects an even more expansionary policy than the one that is actually implemented
B) if the policy comes as a surprise
C) if the public expects a less expansionary policy than the one that is actually implemented
D) if the policy is anticipated

Question

-An important feature of the new classical model is that an expansionary policy, such as an increase in the rate of money growth, can lead to a decline in aggregate output ________.
A) if the public expects an even more expansionary policy than the one that is actually implemented 
B) if the policy comes as a surprise 
C) if the public expects a less expansionary policy than the one that is actually implemented 
D) if the policy is anticipated

Quizplus · Accepted Answer

In the new classical model, if the public expects a more expansionary policy than what is implemented, they may adjust their behavior in a way that leads to a decline in aggregate output, as their expectations are not met.

-An Important Feature of the New Classical Model Is That