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Figure 11-6 -Refer to Figure 11-6. Suppose the Economy Is Operating at Is

Question 119

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Figure 11-6 Figure 11-6 -Refer to Figure 11-6. Suppose the economy is operating at point a and that individuals have rational expectations. They calculate that expansionary monetary policy A) will raise the price level to P<sub>d</sub>; and they adjust their expectations and wage demands shifting the short-run aggregate supply curve to AS<sub>2</sub>.<sub> </sub> B) will raise the price level to P<sub>c</sub>; and they adjust their expectations and wage demands shifting the short-run aggregate supply curve to AS<sub>2</sub>. C) will raise the price level to P<sub>b</sub>; and they adjust their expectations and wage demands shifting the short-run aggregate supply curve to AS<sub>1</sub>. D) will keep the price level at P<sub>a</sub>; and the short-run aggregate supply curve at AS<sub>1</sub>.
-Refer to Figure 11-6. Suppose the economy is operating at point a and that individuals have rational expectations. They calculate that expansionary monetary policy


A) will raise the price level to Pd; and they adjust their expectations and wage demands shifting the short-run aggregate supply curve to AS2.
B) will raise the price level to Pc; and they adjust their expectations and wage demands shifting the short-run aggregate supply curve to AS2.
C) will raise the price level to Pb; and they adjust their expectations and wage demands shifting the short-run aggregate supply curve to AS1.
D) will keep the price level at Pa; and the short-run aggregate supply curve at AS1.

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