Under the Adaptive Expectations Hypothesis, Which of the Following Is

question 31

Multiple Choice

Under the adaptive expectations hypothesis, which of the following is the effect of a shift to a more expansionary monetary policy?

• A) In the short run, the real rate of output will be unaffected, but in the long run, it will increase.
• B) In the short run, the unemployment rate will decrease, but in the long run, it will self correct to the natural rate of unemployment.
• C) There will be a permanent increase in the real rate of output, but the inflation rate will also be a little higher.
• D) In the short run, the impact on the real rate of output is uncertain, but in the long run, output will increase.

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