Multiple Choice
Use the following to answer questions .
Exhibit: Monetary Policy and Rational Expectations 
-(Exhibit: Monetary Policy and Rational Expectations) Suppose the economy is operating at point a. Some people observe that an expansionary monetary policy will increase the money supply and ultimately drive the price level to the equilibrium at
A) d. They rationally adjust their behavior and the aggregate demand curve shifts to the left and d becomes the new equilibrium point.
B) b. They rationally adjust their behavior and the aggregate demand curve shifts to the left and b becomes the new equilibrium point.
C) d. They rationally adjust their behavior and the short-run aggregate supply curve shifts to the left and d becomes the new equilibrium point.
D) c. They rationally adjust their behavior and the short-run aggregate supply curve shifts to the left and d becomes the new equilibrium point.
Correct Answer:
Verified
Correct Answer:
Verified
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