Use the Following to Answer Questions

question 109

Multiple Choice

Use the following to answer questions .
Exhibit: Monetary Policy and Rational Expectations
-(Exhibit: Monetary Policy and Rational Expectations) Suppose the economy is operating at point a. Some people observe that an expansionary monetary policy will increase the money supply and ultimately drive the price level to the equilibrium at

• A) d. They rationally adjust their behavior, bypassing the short-run equilibrium at c.
• B) d. They rationally adjust their behavior, bypassing the short-run equilibrium at b
• C) b. They rationally adjust their behavior, bypassing the long-run equilibrium at d
• D) a . They rationally adjust their behavior, bypassing the short-run equilibrium at b

---

Definitions:

Products

The substances that result from the completion of a chemical reaction, which are typically different in chemical properties from the reactants.

Posterior Probability

The probability of a hypothesis or event occurring given the evidence or data observed.

Prior Probability

The probability of an event before new evidence is considered, used in Bayesian statistics as a part of updating the probability based on new information.

Posterior Probability

is the probability of the hypotheses given the observed data, calculated using Bayes' theorem.