According to the theory of rational expectations, an expected increase in government spending would cause the aggregate supply curve
A) to shift to the left at the same time that the aggregate demand curve shifts to the right.
B) to shift to the left some time after the aggregate demand curve has shifted to the right.
C) to shift to the right before the aggregate demand curve shifts to the right.
D) not to shift at all.
E) to shift to the right after the aggregate demand curve shifts.

Question

Quizplus · Accepted Answer

The Answer of According to the theory of rational expectations, an expected increase in government spending would cause the aggregate supply curve
A) to shift to the left at the same time that the aggregate demand curve shifts to the right.
B) to shift to the left some time after the aggregate demand curve has shifted to the right.
C) to shift to the right before the aggregate demand curve shifts to the right.
D) not to shift at all.
E) to shift to the right after the aggregate demand curve shifts.

According to the Theory of Rational Expectations, an Expected Increase