If expectations are formed rationally, wages and prices are completely flexible in the short run and policy is correctly anticipated, increases in aggregate demand will
A) cause lower short-run price level increases than a Keynesian would expect.
B) cause higher short-run price level increases than a Keynesian would expect.
C) not impact the general price level.
D) produce both increases and decreases in the price level at different times.
B
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a. greater than
b. less than
c. equal to
d. the opposite of