If an economy tried to use bananas as money, which function would bananas likely have the most difficult time fulfilling?

The Lucas critique indicates that

A) advocates of discretionary policies' criticisms of rational expectations models are well-founded. B) advocates of discretionary policies' criticisms of rational expectations models are not well-founded. C) expectations are important in determining the outcome of a discretionary policy. D) expectations are not important in determining the outcome of a discretionary policy.

Suppose the economy is at point 1 in Figure 13.1. With output below potential output, it might not be possible to create any expectation of an increase in inflation

How, then, might output be brought back to potential? What would this look like on the graph?