Under the Rational Expectations Hypothesis, Which of the Following Is

question 1

Multiple Choice

Under the rational expectations hypothesis, which of the following is the most likely short-run effect of a move to expansionary monetary policy?

• A) a higher general level of prices but no change in real output
• B) a higher general level of prices and an expansion in real output
• C) no change in the general level of prices and a reduction in real output
• D) no change in either the general level of prices or real output

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