Question

With adaptive expectations, what is the inevitable consequence of an unexpected, active, expansionary monetary policy in the short and long run

Answer 1

D. lower unemployment in the short run, higher inflation in the long run

Step-by-step explanation:

Remember, like it's name, monetary policy affects the money supply of a country, which in turn influences the Interest rate and inflation rate.

By means of expansionary monetary policy, an economy may experience reduced interests rates, which leads to lower unemployment in the short run. However, in the long run the high inflation rate may begin to occur leading to adaptive expectations.