The factor leading to business cycles in the cycle theory is unexpected fluctuations in aggregate demand while in the cycle theory both unexpected and expected fluctuations in aggregate demand are factors that lead to business cycles.
A) new Keynesian; Keynesian
B) new classical; new Keynesian
C) new classical; monetarist
D) monetarist; new Keynesian

Question

Quizplus · Accepted Answer

The statement accurately describes the differences between the new classical and new Keynesian theories of business cycles. In the new classical theory, only unexpected fluctuations in aggregate demand lead to business cycles, while in the new Keynesian theory, both expected and unexpected fluctuations can lead to cycles. The other options do not accurately reflect this distinction.

The Factor Leading to Business Cycles in the Cycle Theory