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With Rational Expectations, a Correctly Anticipated Policy That Would Increase

Question 4

Multiple Choice

With rational expectations, a correctly anticipated policy that would increase AD would lead to:


A) higher inflation and lower unemployment in the long run.
B) higher inflation and higher unemployment in the short run.
C) higher inflation and no change in unemployment in the short run.
D) lower inflation and lower unemployment in the short run.
E) higher inflation and higher unemployment in the long run.

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