Which of the following is the basic tenet of new classical economics?
a. A change in the fiscal policy affects the equilibrium level of real GDP but has no impact on the equilibrium price level.
b. A government-induced shift in aggregate demand affects the real GDP only if they are expected by the economic agents.
c. A change in aggregate demand affects the aggregate price level only if the aggregate supply curve is perfectly elastic.
d. A change in monetary policy affects the equilibrium level of real GDP only if those changes are unexpected.
e. An expected change in a monetary or fiscal policy leads to a proportional shift of the long run supply curve.
Question 2
The longer the time period considered, the elasticity of supply tends to:
a. decrease.
b. remain constant.
c. increase.
d. converge to zero.
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