Suppose That the Fed Implements Expansionary Monetary Policy That Raises

question 133

Multiple Choice

Suppose that the Fed implements expansionary monetary policy that raises aggregate demand,but individuals incorrectly anticipate the policy measure (bias downward) .According to new classical theory,in the short run the price level would ____________ and Real GDP would ______________.In the long run,new classical theory would predict that the price level would ___________compared to its original long-run equilibrium level and that Real GDP would ____________.

• A) rise; decline; rise; remain unchanged
• B) rise; rise; rise; remain unchanged
• C) rise; decline; remain unchanged; rise
• D) fall; rise; remain unchanged; rise

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Definitions:

Paraventricular Nucleus

A nucleus within the hypothalamus that plays a role in regulating the autonomic nervous system and the secretion of hormones.

Oxytocin

A hormone and neurotransmitter involved in childbirth, lactation, and social bonding.

Dorsolateral Region

An area of the brain associated with executive functions such as working memory, problem-solving, and attention.

Prefrontal Cortex

The part of the brain located at the front of the frontal lobe, crucial for decision making, social behavior, and personality expression.