The Key Difference Between the New Classical Theory of the Business

Multiple Choice

The key difference between the new classical theory of the business cycle and the new Keynesian theory of the business cycle is that the new classical theory believes that ________ while the new Keynesian theory believes that ________.

A) expected changes in aggregate demand will change real GDP; expected changes in aggregate demand will not change real GDP
B) only unexpected changes in aggregate demand will change real GDP; only expected changes in aggregate demand will change real GDP
C) only unexpected changes in aggregate demand will change real GDP; both expected and unexpected changes in aggregate demand will change real GDP
D) the short-run aggregate supply curve is horizontal; the short-run aggregate supply curve is vertical