Figure 11-6 -Refer to Figure 11-6.If Rational Expectations Exist and the Economy

question 119

Multiple Choice

Figure 11-6

-Refer to Figure 11-6.If rational expectations exist and the economy is initially operating at
"d".If the Fed undertakes contractionary monetary policy the economy will

• A)spend some time at c with a recessionary gap.
• B)spend no time at c and move directly to b.
• C)bypass c and move to a, because the short-run aggregate supply curve shifts to the left.
• D)bypass c and move to a, because the short-run aggregate supply curve shifts immediately to the right and the economy moves down the long-run aggregate supply curve.

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Definitions:

Equilibrium

A state of balance.

Harmony

The combination of simultaneously sounded musical notes to produce chords and chord progressions having a pleasing effect.

Hypertension

A medical condition characterized by persistently high blood pressure.

Herbal Tablet

A solid form of medication or supplement made from herbs or extracts, used for various health purposes.