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With Rational Expectations, a Policy That Would Decrease AD Would

Question 7

Multiple Choice

With rational expectations, a policy that would decrease AD would certainly lead to:


A) ​higher inflation and lower unemployment in the short run.
B) ​lower inflation and higher unemployment in the short run.
C) ​higher inflation and no change in unemployment in the short run, if people's expectations were correct.
D) ​none of the above.

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