With Rational Expectations, a Policy That Would Increase AD Would

question 27

Multiple Choice

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

• A)higher inflation and a higher real output in the long run if people's expectations were incorrect.
• B)higher inflation and a lower real output in the long run if people's expectations were incorrect.
• C)higher inflation and a higher real output in the short run if people's expectations were correct.
• D)higher inflation and no change in real output in the short run if people's expectations were correct in the short run.
• E)higher inflation and a lower real output in the short run if people's expectations were incorrect.

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Definitions:

Sensor

A device that detects or measures physical properties and sends the information to a display or control system.

ECU

Stands for Engine Control Unit, an electronic module that controls various engine functions and performance parameters.

Voltage Spikes

Sudden increases in electrical voltage that can potentially cause damage to electronic devices and components.

Circuitry Damage

Damage to the electrical pathways in a device that can interrupt the flow of electricity and impair functionality.