Under the rational expectations hypothesis, which of the following is the most likely short-run effect of a move to expansionary monetary policy?
A. a higher general level of prices but no change in real output
B. a higher general level of prices and an expansion in real output
C. no change in the general level of prices and a reduction in real output
D. no change in either the general level of prices or real output
Answer: A
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In Figure 17-3 above, SAS0 must shift to SAS1 when
A) the actual price level rises. B) the expected price level rises. C) AD0 shifts to AD1. D) the nominal money supply rises.
The price elasticity of demand measures the
a. responsiveness of a good's price to a change in quantity demanded b. adaptability of suppliers when a change in demand alters the price of a good c. responsiveness of quantity demanded to a change in a good's price d. adaptability of buyers when there is a change in demand e. responsiveness of quantity supplied to a change in quantity demanded