Exhibit 17-4 Short-run and long-run Phillips curves Suppose the economy in Exhibit 17-4 is at point E₁, and the Fed increases the money supply. If people have rational expectations, then the economy will move: A) to point A in the short run and point B in the long run. B) directly to point B. C) to point C in the short run and point D in the long run. D) directly to point D.

Question

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The Answer of Exhibit 17-4 Short-run and long-run Phillips curves Suppose the economy in Exhibit 17-4 is at point E₁, and the Fed increases the money supply. If people have rational expectations, then the economy will move: A) to point A in the short run and point B in the long run. B) directly to point B. C) to point C in the short run and point D in the long run. D) directly to point D.

Exhibit 17-4 Short-Run and Long-Run Phillips Curves