The Rational Expectations Hypothesis Suggests That If Wages and Prices

question 158

Multiple Choice

The rational expectations hypothesis suggests that if wages and prices are flexible

• A) unanticipated monetary policy actions can shift the long-run aggregate supply curve but cannot shift the aggregate demand curve.
• B) anticipated monetary policy actions can affect nominal variables, but not real variables.
• C) unanticipated monetary policy actions can affect real variables, but not nominal variables.
• D) growth in the money supply can alter real variables only if the growth is anticipated.

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Definitions:

Long-Run Cost

The total cost of production when all factors of production can be varied, typically associated with the planning of long-term business strategies.

Production Functions

Production functions describe how a firm transforms inputs into outputs, relating the quantity of factor input to the quantity of output produced.

Industry Supply Curve

A graphical representation showing the relationship between the price of a good and the total output provided by all firms in the industry.

Chirimollas

A tropical fruit, also known as custard apple, valued for its sweet taste and nutritional properties, but unknown or incorrect as a key-term might imply "cherimoyas."