In the new Keynesian business cycle theory, can effect real GDP.
A) only unexpected changes in aggregate demand
B) expected and unexpected changes in aggregate demand
C) only expected changes in aggregate demand
D) only unexpected changes in the money wage rate

Question

Quizplus · Accepted Answer

According to the new Keynesian business cycle theory, both expected and unexpected changes in aggregate demand can affect real GDP. Expected changes in aggregate demand can cause price and wage adjustments, while unexpected changes can lead to a temporary mismatch between prices and wages, causing changes in output and employment. The theory does not suggest that only unexpected changes in aggregate demand or changes in the money wage rate can affect real GDP.

In the New Keynesian Business Cycle Theory, Can Effect Real