Question: 3. Use the diagram from problem 2 and a. indicate which movement would correspond to an unanticipated expansionary government policy in the short run. b.


3. Use the diagram from problem 2 and

a. indicate which movement would correspond to an unanticipated expansionary government policy in the short run.

b. indicate which movement would correspond to an unanticipated contractionary government policy in the short run.

c. indicate which movement would correspond to a completely anticipated expansionary government policy, under rational expectations.

d. indicate which movement would correspond to a completely anticipated contractionary government policy in the short run.

e. indicate what would happen if an expansionary government policy occurred, but its inflationary effects were smaller than they were expected to be.

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