According to the rational expectations hypothesis, the attempt by the government to reduce unemployment below its natural rate through expansionary policies will
A) succeed in the short run and can succeed in the long run as long as the government makes it clear what its goals are.
B) succeed because the government knows how people will react to their policies and will adjust their policies accordingly.
C) fail because people will figure out what the government is doing and alter their expectations and their behavior in ways that counteract the government policy.
D) fail because the economy can never achieve an unemployment rate below the natural level.
C
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The long-run Phillips curve applies when the economy is at full employment, so the long-run Phillips curve is ________, which demonstrates that changes in the inflation rate ________ effect on unemployment
A) horizontal; have no B) an upward sloping straight line with a 45 degree slope; have an C) vertical; have no D) vertical; have an E) a downward sloping straight line with a 45 degree slope; have an
If Joey Kobayashi experiences diminishing marginal utility from eating hot dogs then
A) the marginal utility from the next hot dog Joey eats will be negative. B) Joey is maximizing the marginal utility per dollar he receives from eating hot dogs. C) the additional satisfaction he receives from eating another hot dog will be less then the satisfaction he received from his eating his last hot dog. D) his total utility from eating hot dogs is negative.