Studying Alternative Theories of How People Form Expectations Is Particularly

question 65

Multiple Choice

Studying alternative theories of how people form expectations is particularly relevant to monetary policy because

• A) if people fully expect inflation to occur,the effects of monetary policy are more widespread.
• B) monetary policy can only have real effects on the economy if people fully expect inflation.
• C) unexpected inflation cause prices to be flexible.
• D) the effects of expected inflation are completely different from the effects of unexpected inflation.
• E) expected inflation causes prices to become sticky.

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