Refer to the Diagram

question 22

Multiple Choice

Refer to the diagram. Rational expectations theory says that a fully anticipated shift in aggregate demand from AD₁ to AD₂ will

• A) move the economy from a to b to c.
• B) move the economy directly from a to c.
• C) move the economy from a to a new equilibrium at b.
• D) shift the AS curve to the right.

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