According to the Rational Expectations School, If the Fed Announces

question 130

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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Definitions:

Output

The result or data produced by a computer or system after processing input.

Bit Status

The current state (on or off) of a bit, representing the smallest unit of data in digital computing and communications.

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Logic Continuity refers to the uninterrupted and consistent application of logical conditions and operations in a control or computational process.