Suppose that the Federal Reserve is expected to expand the quantity of money by 5 percent but ends up expanding it by only 2 percent.If the new Keynesian theory is correct,which of the following describes the effect on the economy?
A) The economy experience a boom because the quantity of money is still growing.
B) Inflation will be higher than expected.
C) Workers' decisions about when to work will be affected.
D) A recession will ensue.
Correct Answer:
Verified
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