In the new Keynesian model,if an aggregate demand increase is unanticipated,then ________.
A)aggregate demand will not change
B)short-run aggregate supply will shift up immediately
C)short-run aggregate supply will shift down immediately
D)there is no immediate effect on the short-run supply curve

Question

Quizplus · Accepted Answer

In the new Keynesian model, if an increase in aggregate demand is unanticipated, there is no immediate effect on the short-run supply curve. The model suggests that prices and wages are sticky in the short term, so firms do not immediately adjust their supply in response to unexpected changes in demand.

In the New Keynesian Model,if an Aggregate Demand Increase Is