Figure 28-6
-Refer to Figure 28-6. If firms and workers have rational expectations, an expansionary monetary policy will cause the short-run equilibrium to move from

Question

Figure 28-6 
-Refer to Figure 28-6. If firms and workers have rational expectations, an expansionary monetary policy will cause the short-run equilibrium to move from

Quizplus · Accepted Answer

With rational expectations, workers and firms anticipate the effects of expansionary monetary policy, leading to an immediate adjustment in prices and wages. This causes the economy to move directly from point A to point C, bypassing the short-run effects.

Figure 28-6 -Refer to Figure 28-6. If Firms and Workers Have Rational