New Classical Economists Believe That If Policy Is Correctly Anticipated

question 30

Multiple Choice

New classical economists believe that if policy is correctly anticipated and if rational expectations hold,when the Fed increases the money supply the result will be a(n) ______________ in the price level and ____________________________.

• A) decrease; no change in Real GDP
• B) decrease; decrease in Real GDP
• C) increase; no change in Real GDP
• D) increase; increase in Real GDP

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Definitions:

Motivation And Ability

Fundamental drivers of human behavior in organizational settings, where motivation refers to the willingness to perform actions, and ability refers to the capability of performing those actions.

Self-Fulfilling Prophecy

A belief or expectation that directly or indirectly causes itself to become true due to positive feedback between belief and behavior.

Social Identity Theory

A psychological theory that posits individuals derive part of their self-concept from their perceived membership in a relevant social group, influencing their behavior and attitudes.

Self-Fulfilling Prophecy

A prediction that directly or indirectly causes itself to become true due to positive feedback between belief and behavior.