Long-run aggregate supply shocks are not a source of business cycle fl

Long-run aggregate supply shocks are not a source of business cycle fluctuations in the ________, because ________.

A) traditional Keynesian model; long-run supply shocks are incompatible with adaptive expectations
B) traditional Keynesian model; demand fluctuations are considered of dominant importance
C) real business cycle model; shocks cannot persist in the long run, when prices and wages are flexible
D) new Keynesian model; such shocks are anticipated by forward-looking consumers and firms

ANSWER

B