In the long run, does it matter whether a policy action was ...

[hbsimmons88]

In the long run, does it matter whether a policy action was anticipated or not?
 
  What will be an ideal response?

Question 2

Consider the two graphs above. Suppose that improvements in technology enable farmers to produce two or more harvests of the same crop each year. This would ________ the desired level of inventories, as depicted in graph ________.
 
  A) increase; B
  B) increase; A
  C) decrease; B
  D) decrease; A

[qytan]

Answer to Question 1

In the long run, output is potential output. The response to an anticipated policy action comes sooner, but is ultimately no different than the delayed response to a recognized policy. Nonetheless, it does matter whether or not the policy had been anticipated, because anticipated policies are less destabilizing to output.

Answer to Question 2

D

[hbsimmons88]

Gracias!

[covalentbond]

Thanks for the timely response, appreciate it