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Question 49

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Use the following to answer questions.
Exhibit: Economic Adjustments Use the following to answer questions. Exhibit: Economic Adjustments -(Exhibit: Economic Adjustments) Suppose the economy is at point a. Assume that (1) the public's expectations are completely rational; (2) markets allocate resources instantaneously; and (3) the economy is at its natural level of employment. The theoretical adjustment path resulting from an increase in aggregate demand according to the rational expectations hypothesis is A) a to c to d. B) a to b to d. C) a to d. D) a to b and back to a.
-(Exhibit: Economic Adjustments) Suppose the economy is at point a. Assume that (1) the public's expectations are completely rational; (2) markets allocate resources instantaneously; and (3) the economy is at its natural level of employment. The theoretical adjustment path resulting from an increase in aggregate demand according to the rational expectations hypothesis is


A) a to c to d.
B) a to b to d.
C) a to d.
D) a to b and back to a.

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