The Lucas Supply Function, in Combination with the Assumption That

question 109

Multiple Choice

The Lucas supply function, in combination with the assumption that expectations are rational, implies that if a monetary policy change is announced to the public, the actual price level

• A) will be impacted more than the expected price level.
• B) will be impacted less than the expected price level.
• C) and the expected price level will be impacted in the same way.
• D) will be impacted but the expected price level will not.

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