-Refer to Exhibit 16-10

question 78

Multiple Choice

-Refer to Exhibit 16-10.Assume that the starting point is point 1.Suppose that the government implements expansionary fiscal policy that raises aggregate demand.Which of the following best goes with the diagram shown?

• A) New classical theory with policy incorrectly anticipated,bias downward
• B) New classical theory with policy incorrectly anticipated,bias upward
• C) Real business cycle theory
• D) New classical theory with policy unanticipated
• E) Policy ineffectiveness proposition (PI

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