The key concept in the new classical approach to the aggregate supply curve is
A) the impact of imperfect information on business decisions.
B) the impact of changes in the price level on real money balances.
C) the inverse relationship between the real interest rate and desired investment spending.
D) the crowding out of investment spending by government spending.

Question

Quizplus · Accepted Answer

The new classical approach to the aggregate supply curve emphasizes the role of imperfect information on business decisions, particularly how firms interpret changes in their own prices relative to overall price levels in the economy. This can lead to adjustments in output based on misperceptions about relative prices.

The Key Concept in the New Classical Approach to the Aggregate