A good way to reduce unemployment in rural areas is to
a. encourage migration of surplus labor to the cities
b. encourage manufacturing and service activities in the rural areas
c. increase the labor intensity of agricultural production
d. improve the technological sophistication of agricultural production
e. none of the above
B
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Which of the following is an important implication of the rational expectations argument?
A) Since people form their expectations using all available information, the use of monetary policies to eliminate output gaps will lead to inflation. B) Since any consistent set of monetary policies will be learned and anticipated by a population with rational expectations, policies designed to influence the economy to a level of production other than the potential real GDP will be ineffective. C) Although people may revise their expectations about the price level and future economic activity, they cannot act on these changes because in reality, wages and prices are sticky. Thus, policy intervention is necessary. D) Policymakers must constantly monitor economic activity and revise their economic policy goals to keep up with changing expectations of a population with rational expectations.
Proponents of rational expectations argue that failing to account for peoples' revised inflation expectations led to estimates of the sacrifice ratio that were too high
a. True b. False Indicate whether the statement is true or false