According to the Rational Expectations Theory, If the Federal Reserve

question 132

Multiple Choice

According to the rational expectations theory, if the Federal Reserve announces that it is going to decrease the money supply, output

• A) and the price level both will fall in the short run.
• B) will remain unchanged, but the price level will fall immediately.
• C) will fall in the short run but return to full employment output at a lower price level in the long run.
• D) will fall in the short run, but the price level will remain unchanged.

---

Definitions:

Practices Versus Values

The comparison between what is actually done (practices) and the underlying reasons or beliefs for these actions (values).

Power Distance

A dimension of organizational culture that reflects the extent to which power is distributed unequally among levels in an organization.

Participative Leadership

A leadership style where the leader involves team members in the decision-making process, promoting collaboration and democratic engagement.

Traditional Leadership

Involves leadership styles and practices based on historical or conventional methods, often contrasting with modern or innovative approaches.