What do rational expectations theorists believe? What is their critics' point of view?
Rational expectation economists believe that wages and prices are flexible and thus should be left free from direct government intervention. They also believe that workers and consumers quickly form accurate expectations about the effects of government policies, and adapt to them, which essentially eliminates the ability of government policy to effectively manage or control the economy.
Critics of rational expectation theory believe that most people are not truly informed about the effects of a policy change and therefore do not adjust their behavior very quickly or completely. Additionally, they question whether prices and wages are really that flexible.
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If the utility for two goods "x" and "y" can be measured as U = x, then it can be concluded that
A) "x" and "y" are perfect complements. B) "y" is a "bad". C) the indifference curves on the x,y graph are upward sloping where "x" is measured on the horizontal axis. D) the indifference curves on the x,y graph are vertical where "x" is measured on the horizontal axis.
An R2 close to 1
A) does not happen with real data. B) indicates that almost all of the variation in the dependent variable is explained by the regression. C) does not explain variation as well as an R2 that is above 2. D) means that the regression line does not fit the data very well.