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.

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