In the extended classical model,an unexpected decrease in aggregate demand would cause unanticipated inflation to be ________ and cyclical unemployment to be ________.
A)positive; negative
B)positive; positive
C)negative; negative
D)negative; positive

Question

Quizplus · Accepted Answer

In the extended classical model, an unexpected decrease in aggregate demand leads to a decrease in the price level and real output, causing cyclical unemployment to increase (positive) and unanticipated inflation to decrease (negative). Therefore, the correct answer is (D) negative; positive.

In the Extended Classical Model,an Unexpected Decrease in Aggregate Demand