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:

Political Science

The study of political organizations and institutions, especially governments.

Social Psychology

The scientific study of how people's thoughts, feelings, and behaviors are influenced by the actual, imagined, or implied presence of others.

Social Psychology

A branch of psychology concerned with understanding how social phenomena influence individual psychological processes.

Cultural Context

The environmental and social variables that influence the norms, behaviors, and practices of an individual or community.