Multiple Choice
If people have rational expectations and correctly estimate the effects of a change in government policy, when the economy is initially at full employment, any anticipated increase in aggregate demand will result in:
A) a decrease in both aggregate demand and short-run aggregate supply.
B) an increase in short-run aggregate supply that will maintain full employment.
C) higher prices that will reduce aggregate demand to its original level.
D) a decrease in short-run aggregate supply that will maintain full employment.
E) no shift in either aggregate demand or short-run aggregate supply.
Correct Answer:
Verified
Correct Answer:
Verified
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