Question: In the Lucas model with anticipated monetary policy, consider two economies A and B, which are otherwise identical except that zA > zB. Then, (a)

In the Lucas model with anticipated monetary policy, consider two economies A and B, which are otherwise identical except that zA > zB. Then,

(a) aggregate output will be higher in economy A. (b) the incentive to produce output will be stronger on both islands in economy A.

(c) welfare will be lower in economy B. (d) the incentive to produce output will be stronger on both islands in economy B.

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