Suppose the central bank implements a monetary expansion that is ...

[WhattoUnderstand]

Suppose the central bank implements a monetary expansion that is not fully anticipated by financial markets. Given this information, we would expect
 
  A) stock prices to rise.
  B) stock prices to fall.
  C) stock prices to remain unchanged.
  D) an ambiguous effect on stock prices.
  E) none of the above

Question 2

Which of the following will occur when an economy is faced with a liquidity trap situation?
 
  A) A reduction in the price level will cause a rightward shift in the aggregate demand curve.
  B) A reduction in the price level will cause a leftward shift in the aggregate demand curve.
  C) The aggregate demand curve is now vertical.
  D) The aggregate demand curve is now upward sloping.

[parshano]

Answer to Question 1

A

Answer to Question 2

C