Under the Adaptive Expectations Hypothesis, Which of the Following Is

question 40

Multiple Choice

Under the adaptive expectations hypothesis, which of the following is the effect of a shift to a more expansionary monetary policy?

• A) In the short run, the real rate of output will be unaffected, but in the long run, it will increase.
• B) In the short run, the real rate of output will increase, but in the long run, it will be unchanged.
• C) There will be a permanent increase in the real rate of output, but the inflation rate will also be a little higher.
• D) In the short run, the impact on the real rate of output is uncertain, but in the long run, output will increase.

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Definitions:

Tax Liability

The total amount of tax owed by an individual or corporation to the tax authorities.

Monthly Schedule Depositor

A designation for businesses that determines how frequently they must deposit employment taxes to the IRS based on their payroll size.

Semiweekly Schedule Depositor

A designation for businesses that must deposit payroll taxes on a semiweekly basis, determined by the amount of their tax liability.

Payroll Tax Liability

The obligation of employers to withhold and pay taxes on behalf of their employees, such as social security and Medicare taxes.