What does the coefficient a in the new classical expression for short-run aggregate supply represent?
A) the full employment level of output
B) the price level in the previous period
C) how much output responds when the actual price level differs from the expected price level
D) how much the price level responds when the actual level of output differs from the full-employment level of output

Question

Quizplus · Accepted Answer

The coefficient "a" in the new classical expression for short-run aggregate supply represents how much output responds when the actual price level differs from the expected price level. It reflects the idea that firms adjust their output when there are unexpected changes in the price level, which affects their profits.

What Does the Coefficient a in the New Classical Expression