Which business cycle theory suggests that an expansionary monetary or fiscal policy should be used to revive an economy from a recession? A: Monetarist theory. B: Keynesian theory. C: New classical theory.

Which of the following assumptions is crucial to the classical model but not the Keynesian model? A: The real wage always equals the marginal product of labor. B: Real wages are perfectly flexible. C: Nominal wages are perfectly flexible. D: Monetary policy primarily affects aggregate demand.