Starting from an Initial Long-Run Equilibrium, Under the Adaptive Expectations

question 8

Multiple Choice

Starting from an initial long-run equilibrium, under the adaptive expectations hypothesis, a shift to a more expansionary policy will increase

• A) prices and unemployment in the long run.
• B) real output in the short run but not in the long run.
• C) real output in the long run but not in the short run.
• D) real output in both the long run and the short run.