According to the Rational Expectations School,if the Fed Announces a Policy

question 45

Multiple Choice

According to the rational expectations school,if the Fed announces a policy of rapid growth in the money supply,but then puts the brakes on money expansion without any announcement,which of the following is likely to be the short-run result?

• A)An unexpected surge in aggregate demand
• B)An unexpected drop in aggregate demand.
• C)An anticipated surge in aggregate demand.
• D)An anticipated drop in aggregate demand.
• E)No change in aggregate demand.

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