If everyone expects prices to fall but they do not, then
a. nothing happens.
b. the IS curve shifts to the left and the AD curve shifts to the right.
c. both IS and AD shift to the right.
d. both IS and AD shift to the left.
e. the IS curve shifts to the right, the AD curve shifts to the left.
Question 2
Which of the following statements is correct with respect to the debate between the Keynesians and new classical economists?
a. Each side criticized monetarism
b. The key source of disagreement centered on how people form their expectations.
c. Both models believed that recessions were characterized by falling aggregate demand.
d. Both believed that unanticipated changes in monetary policy could influence output.
e. all of the above.
Fall
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