If All Wages and Prices Are Perfectly Flexible with Respect

question 44

Multiple Choice

If all wages and prices are perfectly flexible with respect to expected changes in the price level, then an expansionary monetary policy will cause ________.

• A) the aggregate demand curve to shift to the right, and output to increase only if the policy is anticipated
• B) the aggregate demand curve to shift to the right, and output to increase only if the policy is unanticipated
• C) an increase in the price level
• D) B and C only

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