Consider an Economy Described Collectively by a Schedule of the Form

Multiple Choice

Consider an economy described collectively by a schedule of the form
_ˆ − δ
Y = _B+
Α
Π − π *) , an expectations-augmented Phillips curveand a
Partially backward-looking definition of how price expectations are formed. Which of the following is not an accurate description of a step in recovery from recession?

A) Inflation falls as expectations gradually decline.
B) The microeconomic policy curve shifts to the right and predicts lower interest rates.
C) Higher investment dominates diminishing net exports to drive aggregate demand higher.
D) Higher output production drives employment and, thus, aggregate demand higher.
E) None of the above.