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Exhibit 16-2 -Refer to Exhibit 16-2.Suppose the Economy Starts at Point B.Fed

Question 107

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Exhibit 16-2
Exhibit 16-2 -Refer to Exhibit 16-2.Suppose the economy starts at point B.Fed monetary policy shifts the AD curve to AD<sub>1</sub>.If policy is correctly anticipated and people hold rational expectations,according to new classical theory the economy in the short run will A) move to A. B) stay at B. C) move to F. D) move to E.
-Refer to Exhibit 16-2.Suppose the economy starts at point B.Fed monetary policy shifts the AD curve to AD1.If policy is correctly anticipated and people hold rational expectations,according to new classical theory the economy in the short run will


A) move to A.
B) stay at B.
C) move to F.
D) move to E.

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