If Expectations Are Formed Rationally,wages and Prices Are Completely Flexible

question 145

Multiple Choice

If expectations are formed rationally,wages and prices are completely flexible in the short run and policy is correctly anticipated,increases in aggregate demand will

• A) cause lower short-run price level increases than a Keynesian would expect.
• B) cause higher short-run price level increases than a Keynesian would expect.
• C) not impact the general price level.
• D) produce both increases and decreases in the price level at different times.

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Definitions:

Arbitration

A method of dispute resolution where a neutral third party makes a binding decision to resolve a conflict outside of court.

Mediation

A form of alternative dispute resolution where a neutral third party helps disputing parties find a mutually acceptable solution.

Dispute Resolution

A process through which disagreements or conflicts are resolved, often involving negotiation, mediation, arbitration, or litigation.

Parties

Individuals or entities that enter into a legal agreement or are engaged in a lawsuit.