In the new Keynesian model,the effects on output of an anticipated aggregate demand shock are ________.
A)less than if that event was unanticipated
B)greater than if that event was unanticipated
C)the same as would develop if that event was unanticipated
D)independent of whether or not that event is anticipated or unanticipated

Question

Quizplus · Accepted Answer

In the new Keynesian model, the effects of an anticipated aggregate demand shock are less than if the shock was unanticipated. This is because, in the case of an anticipated shock, firms have more time to adjust their prices and take other necessary measures, which reduces the magnitude of the shock's impact on output.

In the New Keynesian Model,the Effects on Output of an Anticipated