The proponents of rational expectations believe that:
a. there will be a substantial time lag before people anticipate the eventual effects of a shift to a more expansionary macro-policy.
b. macro-policies that stimulate demand and place upward pressure on the general level if prices will temporarily increase output and employment.
c. the inflationary side effects of expansionary policies will be anticipated quickly, and therefore, even their short-run effects on real output and employment will be minimal.
d. discretionary changes in macro-policy can be made in a manner that will reduce the economic ups and downs of a market economy.
c
You might also like to view...
Unlike firms in a perfectly competitive industry, monopolists have control over
a. the price they charge for the product b. the quantity of output they produce c. the prices they pay for resources d. the quantities of various resources which are used e. improvements in technology
Equilibrium in the foreign exchange market occurs:
a. at the point where the foreign exchange demand and supply curves intersect. b. at the point where the foreign exchange demand and supply curves reach maximum separation. c. when two nations' economic leaders agree on the appropriate exchange rate. d. when two nations' diplomatic leaders agree on an exchange rate that meets both countries' needs. e. only by chance, if at all, because they change very frequently.