Ms. Jones is a professor at a university. She strongly supports the rational expectations theory. She is likely to believe that the only time active policy has an impact on aggregate output is when:
a. an expansionary policy is implemented.
b. a recessionary policy is implemented.
c. policy changes are unannounced

Assuming a horizontal aggregate supply curve, output will change when

a. monetary or fiscal policy changes. b. monetary policy changes. c. fiscal policy changes. d. capital, labor, or technology changes. e. all of the above

A $100 billion increase in government purchases would:

a. increase AD by $500 billion if MPC = 0.8. b. decrease AD by $300 billion if MPC = 2/3. c. decrease AD by $200 billion if MPC = 0.9. d. decrease AD by $40 billion if MPC = 0.4.