With Rational Expectations, a Correctly Anticipated Policy That Would Increase

question 89

Multiple Choice

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

• A)​higher inflation and lower unemployment in the short run.
• B)​higher inflation and higher unemployment in the short run.
• C)​higher inflation and no change in unemployment in the short run.
• D)​lower inflation and lower unemployment in the short run.

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Definitions:

Collection Float

The time period between when a check is deposited into a bank account and the time the funds are available to the depositor.

Mailing Time

The duration it takes for correspondence to be delivered from the sender to the recipient.

Collection Float

The time period between when a check is deposited and when the funds become available in the recipient's account.

Net Float

Net float is the difference between the amount of checks written by a company and the amount that has been cleared and charged to the company's account, affecting its available balance.