Within the Aggregate Demand-Aggregate Supply Framework, a Strict Interpretation of Rational

question 17

Multiple Choice

Within the aggregate demand-aggregate supply framework, a strict interpretation of rational expectations theory suggests that a change in aggregate:

• A) Demand will have a large effect on the price level, but a small effect on output
• B) Demand will have a small effect on the price level, but a large effect on output
• C) Demand will have a large effect on the price level, but no effect on output
• D) Supply will have a large effect on the price level, but no effect on output

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Definitions:

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