Under the new classical model,monetary policy can
A)have an effect in both the short and the long run.
B)have an effect on the long run,but not the short run.
C)have an effect only on the short run and only if the policy is unanticipated.
D)have an effect only on the long run and only if the policy is fully anticipated.

Question

Quizplus · Accepted Answer

Under the new classical model, monetary policy is believed to have an effect only in the short run and only if the policy is unanticipated. This is because individuals and firms adjust their expectations quickly when the policy is anticipated, neutralizing its impact in the long run.

Under the New Classical Model,monetary Policy Can