Suppose That the Fed Implements Expansionary Monetary Policy That Raises

question 133

Multiple Choice

Suppose that the Fed implements expansionary monetary policy that raises aggregate demand,but individuals incorrectly anticipate the policy measure (bias downward) .According to new classical theory,in the short run the price level would ____________ and Real GDP would ______________.In the long run,new classical theory would predict that the price level would ___________compared to its original long-run equilibrium level and that Real GDP would ____________.

• A) rise; decline; rise; remain unchanged
• B) rise; rise; rise; remain unchanged
• C) rise; decline; remain unchanged; rise
• D) fall; rise; remain unchanged; rise

Identify and apply the principle of equal marginal utility per dollar spent across goods.

Comprehend and apply the concept of the Lagrange multiplier in the context of constrained optimization problems.

Understand the Hicksian substitution effect and its implications on consumer choice.

Identify the mathematical techniques used in solving constrained optimization problems.

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Definitions:

Variability

The extent to which data points in a statistical distribution or data set diverge from the average or mean.

Normal Distribution

A symmetrical, bell-shaped distribution of data where most of the observations cluster around the central peak and probabilities for values taper off equally on both sides.

Standard Normal Distribution

A specific probability distribution that has a mean of zero and a standard deviation of one, representing a normal distribution.

Unit of Measurement

A definite magnitude of a quantity, defined and adopted by convention or by law, that is used as a standard for measurement of the same kind of quantity.