If rational expectations theory is correct, then any increase in aggregate demand caused by announced expansionary policies
A) leads to a short-run increase in real output but no long-run increase.
B) causes the inflation rate to fall.
C) is offset by rising inflationary expectations, causing the short-run aggregate supply curve to immediately shift to the left.
D) is offset by rising inflationary expectations, causing the short-run aggregate supply curve to slowly shift to the left.
Correct Answer:
Verified
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