Figure 17-3 -Refer to Figure 17-3. Suppose the Economy Is at Point

question 112

Multiple Choice

Figure 17-3
-Refer to Figure 17-3. Suppose the economy is at point a. Assume that (1) the public's expectations are completely rational; (2) markets allocate resources instantaneously; and (3) the economy is at its natural level of employment. The theoretical adjustment path resulting from an increase in aggregate demand according to the rational expectations hypothesis is

• A) a to c to d.
• B) a to b to d.
• C) a to d.
• D) a to b and back to a.

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Definitions:

Freeriding Increases

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