Which Statement Is True When Rational Expectations Exist and There

question 145

Multiple Choice

Which statement is true when rational expectations exist and there is a change in monetary policy which is expected?

• A) The change in monetary policy leads to a change in aggregate demand that leads to a temporary short-run equilibrium that is different from the long-run equilibrium.
• B) The change in monetary policy leads to a simultaneous shift of the short-run aggregate supply curve.
• C) The change in monetary policy lead to a simultaneous shift in the long-run aggregate supply curve.
• D) The change in monetary policy does not change equilibrium in either the short-run or long-run.

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Definitions:

Product Demand

The amount of a product or service that buyers are ready and capable of buying at different price levels over a specified time frame.

Decreasing-cost Industry

An industry wherein an increase in the scale of production leads to a reduction in the average cost of production.

Input Prices

The costs associated with purchasing the raw materials, labor, and other factors of production required to produce goods or services.

Industry Expands

The process of growth within a specific sector of the economy, characterized by an increase in output, sales, or the number of operators.