Question

In: Economics

The Fed initiates a contractionary monetary policy that is correctly anticipated by economic agents in the...

The Fed initiates a contractionary monetary policy that is correctly anticipated by economic agents in the economy. The result is

decreased prices, but no change in real GDP.

decreased real GDP in the short run and decreased prices in the long run.

decreased real GDP and prices in both the short run and the long run.

decreased prices and decreased real GDP in the short run, but only decreased prices in the long run.

Solutions

Expert Solution

Answer = correct option is C

Reason = when Fed initiates a contractionary monetary policy that is correctly anticipated by Economic agents in the economy this will result in leftward shift in aggregate demand curve due to which there will be decreased real GDP and price in short run and long run.

Rahul Sunny answered 2 years ago
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