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If Market Participants Expect the Fed to Increase Aggregate Demand

Question 46

Multiple Choice

If market participants expect the Fed to increase aggregate demand in response to a drop in aggregate demand, then,


A) the job of policymakers will be much easier.
B) input prices will respond much more quickly than otherwise.
C) if the Fed does nothing, the decrease in input prices that cause short run aggregate supply to shift rightward will take longer.
D) markets will automatically move to equilibrium very quickly.

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