Critics of rational expectation theory believe:
a. most people are truly not very informed about the effects of a policy change
b. most people do not adjust their behavior very rapidly to changes in government policies, in part because they are not informed about the effects of policy changes.
c. that wages and prices are not as flexible as the rational expectation theory assumes.
d. all of the above.
d
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The adoption of capital controls makes
A) everyone in the domestic economy better off. B) some domestic residents better off and some worse off, although on average welfare increases. C) some domestic residents better off and some worse off, although on average welfare decreases. D) everyone in the domestic economy worse off.
Which of the following would generally cause firms to expand output in the short run?
a. a proportional increase in the prices of goods and services and the costs of producing them b. higher profit margins as the result of an unexpected increase in the prices of goods and services c. an unexpected reduction in aggregate demand d. an increase in wages and the prices of other resources