With Rational Expectations, a Correctly Anticipated Policy That Would Increase

question 89

Multiple Choice

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

• A)​higher inflation and lower unemployment in the short run.
• B)​higher inflation and higher unemployment in the short run.
• C)​higher inflation and no change in unemployment in the short run.
• D)​lower inflation and lower unemployment in the short run.

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Definitions:

Accounting Equation

The fundamental equation of double-entry bookkeeping, stating that assets equal liabilities plus shareholders' equity (Assets = Liabilities + Equity).

Liabilities

Financial obligations or debts owed by a company to creditors, typically categorized as current (due within one year) or long-term.

Stockholders' Equity

The ownership interest of shareholders in a corporation, represented by their shares of the company.

Increase Assets

The act of growing the resources owned by an entity that have future economic value and can be measured and expressed in monetary units.