Under Rational Expectations,which of the Following Will Likely Be an Initial

question 52

Multiple Choice

Under rational expectations,which of the following will likely be an initial effect of an unanticipated shift to a more restrictive macroeconomic policy?

• A)a short-run decrease in output and a long-run decrease in inflation
• B)no change in output even in the short run,only a permanent decrease in inflation
• C)a short-run decrease in inflation and a long-run decrease in output
• D)lower inflation and lower output in the long run

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Definitions:

Break-Even Point

The point at which the costs of producing a product equal the revenue made from selling the product.

Variable Costs

Costs that vary depending on the number of units produced or sold.

Units Produced

Units Produced refers to the total number of units of a product that are manufactured during a specific period.

Escalator Clause

A contract provision allowing for an increase in prices or costs under specific conditions.