Use the Following to Answer Questions

question 79

Multiple Choice

Use the following to answer questions
Figure: Understanding Expectation Theories
-(Figure: Understanding Expectation Theories) Assume the economy is at point c.According to the theory of rational expectations,if the Fed announces and then starts a plan to practice contractionary policy,the economy will move from point c:

• A) to point a to point d.
• B) to point b to point d.
• C) directly to point d.
• D) to point a to point b.

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Definitions:

Budgeted Net Income

The estimated amount of money expected to be earned over a specific period after all expenses are subtracted.

Variable Costs

Costs that change in proportion to the level of production or business activity.

Fixed Costs

Expenses that do not vary with the volume of output, including costs like rent, salaries, and insurance premiums.

Net Income

The total earnings of a company after subtracting all expenses, taxes, and costs, indicating its profitability.