In new classical economics, the change in output caused by a "price-level surprise": a

Business Dec 28, 2020

In new classical economics, the change in output caused by a "price-level surprise":

a. Is shown as a shift of the long-run aggregate supply curve,

b. Is soon reversed through a shift of the short-run aggregate supply curve,

c. Permanently changes the rate of unemployment,

d. Does not alter the rate of unemployment, even in the short run.

Expert Solution

Option Choice B is the correct answer.

As new classical economics causes a temporary change in real output due to "price-level surprise" it is soon reversed through a shift of the short-run aggregate supply curve.

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