In response to an unanticipated easing of monetary policy,the price level ________ at first,then ________ after a year.
A)rises; returns most of the way to its original value
B)falls; returns most of the way to its original value
C)remains roughly unchanged; begins to rise
D)remains roughly unchanged; begins to fall

Question

Quizplus · Accepted Answer

Initially, the price level remains roughly unchanged due to price stickiness and delayed effects of monetary policy. Over time, as the economy adjusts, the price level begins to rise due to increased demand and inflationary pressures from the easing of monetary policy.

In Response to an Unanticipated Easing of Monetary Policy,the Price