Question

According to the New-Classical perspective, what will happen in the long-run if the government adopts a policy to increase aggregate demand?

Answer 1

Increase in inflation

Step-by-step explanation:

According to the New-Classical perspective, an increase in aggregate demand will in the long-run result in an increase in inflation.

Aggregate demand has to do with the the total spending on goods and services over a period of time at a particular level of prices. Any policy that will bring about an increase in aggregate will result in increase in prices of goods and services in the long-run.