According to the Lucas supply function, if people's expectations are ________, then the amount of output they produce is not related to the price level.
A) on target
B) too low
C) too high
D) none of the above

Question

Quizplus · Accepted Answer

According to the Lucas supply function, if people's expectations are on target, then they already anticipate changes in the price level and adjust their production accordingly. Therefore, the amount of output they produce is not related to the price level.

According to the Lucas Supply Function, If People's Expectations Are