With Rational Expectations, a Policy That Would Increase AD Would

question 104

Multiple Choice

With rational expectations, a policy that would increase AD would lead to:

• A)​higher inflation and higher real output in the short run.
• B)​higher inflation and lower real output in the short run.
• C)​higher inflation and an indeterminate effect on real output in the short run, if people's expectations were correct.
• D)​higher inflation and no change in real output, if people's expectations were correct in the short-run.

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Definitions:

Hearing Impairment

A partial or total inability to hear sounds in one or both ears.

Down Syndrome

A genetic disorder caused by the presence of all or part of a third copy of chromosome 21, characterized by physical growth delays, characteristic facial features, and mild to moderate intellectual disability.

Homologous Chromosomes

Pairs of chromosomes in a diploid organism that are similar in shape, size, and genetic content, one inherited from each parent.