Author Question: The Lucas supply model, in combination with the assumption that expectations are rational, leads to ... (Read 36 times)

Ebrown · **on:** Apr 19, 2019

Question 1

Refer to the information provided in Figure 32.3 below to answer the question(s) that follow.

Refer to Figure 32.3. Suppose the economy is at Point
C. According to the new classical theory, an anticipated decrease in aggregate demand

◦ moves the economy to Point
A.
◦ moves the economy to Point
B.
◦ leaves the economy at Point
C.
◦ moves the economy to Point
D.

Question 2

The Lucas supply model, in combination with the assumption that expectations are rational, leads to the conclusion that

◦ expansionary policies, but not contractionary policies, can have an impact on real output.
◦ contractionary policies, but not expansionary policies, can have an impact on real output.
◦ only unanticipated policy changes can have an impact on output.
◦ neither anticipated nor unanticipated policy changes can have an impact on output.

joanwhite · **Reply #1 on:** Apr 19, 2019

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