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 does not change equilibrium in either the short-run or long-run.
B. 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.
C. The change in monetary policy lead to a simultaneous shift in the long-run aggregate supply curve.
D. The change in monetary policy leads to a simultaneous shift of the short-run aggregate supply curve.
Answer: D
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Assume Alan's budget constraint is demonstrated by line A in the graph shown. Which of the following could cause Alan's budget constraint to change to line B?
A. The price of books could have decreased.
B. The price of books could have increased.
C. The price of movie tickets could have increased.
D. The price of movie tickets could have decreased.
The point on a linear demand curve where revenue is maximized is where
A. the price is the highest. B. elasticity equals 0. C. elasticity equals -1. D. elasticity equals infinity.