Under rational expectations,which of the following will likely be an initial effect of an unanticipated shift to a more restrictive macroeconomic policy?
A) a short-run decrease in output and a long-run decrease in inflation
B) no change in output even in the short run,only a permanent decrease in inflation
C) a short-run decrease in inflation and a long-run decrease in output
D) lower inflation and lower output in the long run
Correct Answer:
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