If the Public Believes the Government's Claim That It Will

question 88

Multiple Choice

If the public believes the government's claim that it will pursue low inflation policies, and the government then turns around and adopts an expansionary policy, then

• A)the IA line will shift up before the AD curve shifts right.
• B)the IA line will shift up after the AD curve shifts right.
• C)the IA line will shift down before the AD curve shifts right.
• D)the IA line will shift down after the AD curve shifts right.
• E)real GDP will not increase.