Within the Aggregate Demand-Aggregate Supply Framework, a Strict Interpretation of Rational

question 215

Multiple Choice

Within the aggregate demand-aggregate supply framework, a strict interpretation of rational expectations theory suggests that a change in aggregate

• A) demand will have a large effect on the price level but a small effect on output.
• B) demand will have a small effect on the price level but a large effect on output.
• C) demand will have a large effect on the price level but no effect on output.
• D) supply will have a large effect on the price level but no effect on output.