The Lucas Supply Function, in Combination with the Assumption That

question 207

Multiple Choice

The Lucas supply function, in combination with the assumption that expectations are rational, implies that

• A) anticipated policy changes have a significant effect on real output.
• B) unanticipated policy changes have no effect on real output.
• C) anticipated policy changes have no effect on real output.
• D) the effect that policy changes have on real output is the same, regardless of whether those changes are anticipated or not.

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