Suppose Workers and Firms Come to Expect an Expansionary Monetary

question 92

Multiple Choice

Suppose workers and firms come to expect an expansionary monetary policy and the resulting inflation.What do some economists believe will occur when workers and firms believe this?  

• A) Workers and firms will act so as to prevent price increases from occurring. 
• B) The actions of workers and firms will lead to a further increase in output. 
• C) Neither output nor employment will be affected by the expansionary policy. 
• D) The monetary authority will be forced to cancel the expansionary policy.

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Definitions:

Phenylketonuria

A genetic disorder that results in the inability to metabolize phenylalanine, leading to its accumulation in the body.

Metabolism

The set of life-sustaining chemical reactions in organisms, involving the conversion of food to energy and building materials.

Amino Acid

Organic compounds that combine to form proteins and are essential to many biological processes in living organisms.

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An infection caused by the parasite Toxoplasma gondii, often contracted through undercooked contaminated meat, water, or soil, or from infected cat feces.