Starting from an Initial Long-Run Equilibrium, Under the Rational Expectations

question 112

Multiple Choice

Starting from an initial long-run equilibrium, under the rational expectations hypothesis, an anticipated shift to a more expansionary policy will increase

• A) prices but not real output in the short run.
• B) real output but not prices in the short run.
• C) real output in the long run but not in the short run.
• D) real output in both the long run and the short run.

Identify the effects of price changes on the consumption of goods.

Deduce the slope of the budget constraint and interpret its economic implications.

Evaluate available and unavailable choices within a given budget constraint.

Explain the opportunity cost concept in the context of budget constraints.

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Definitions:

Capital Account

An account showing the net changes in a nation's financial assets and liabilities as part of its balance of payments.

Statement Of Partners' Equity

A financial document that outlines the changes in the equity accounts of partners throughout the accounting period, including additions due to investments and profits, and deductions due to withdrawals and losses.

Partnership

An approved manner of conducting business that involves multiple people sharing control and profits.

Loss On Realization

The loss recognized when assets are sold for less than their carrying amount during the liquidation of a company.