Under the Rational Expectations Hypothesis, Which of the Following Is

question 168

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 little or 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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Definitions:

Operating Cycle

The operating cycle is the time period it takes for a company to purchase inventory, sell it, and convert the sale into cash.

Cash Cycles

The amount of time it takes for a business to convert its investments in inventory and other resources into cash flows from sales.

Accounts Payable Turnover

A financial ratio that measures the rate at which a company pays off its suppliers by comparing total purchases to average accounts payable.

Inventory Sold

The total cost of goods or merchandise a business has sold to customers during a specific period, key for calculating cost of goods sold.