1)

In the new classical model, prices.

A) wages and prices are sticky with respect to expected changes in the price level.

B) a rise in the expected price level results in an immediate and equal rise in wages and

C) an anticipated increase in the money supply will increase aggregate output temporarily.

D) unanticipated policy has no effect on aggregate output and unemployment.

2)

Rational expectations theory suggests that the success of an anti-inflationary policy depends on the

A) adoption of a gold standard.

B) passage of a tax cut.

C) credibility of the policy in the eyes of the public.

D) imposition of wage and price controls.