The Rational Expectations Equilibrium Approach to Macroeconomics

question 11

Multiple Choice

The rational expectations equilibrium approach to macroeconomics

• A)stresses the importance of market imperfections in determining the outcome of macroeconomic policies
• B)asserts that monetary policy can do little to affect output or unemployment unless it is unanticipated
• C)implies that macroeconomic policy works only when the public completely understands it
• D)ignores the microeconomic decision making process of households and firms
• E)was first developed in the 1960s but was soon discarded since most economists believed that it is unimportant to incorporate microeconomic foundations into macroeconomics

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Definitions:

Variable Administrative Expense

Costs associated with administrative activities that vary with the level of business activity or output.

Reclassifying Costs

The process of moving costs from one category to another in accounting records.

Period Costs

Expenses that are not directly tied to production and are expensed in the period in which they occur, such as selling and administrative expenses.

Product Costs

Expenses directly associated with the creation of a product, including materials, labor, and factory overhead.