The Contribution of the Rational Expectations Theory to the Long-Run

question 104

Multiple Choice

The contribution of the rational expectations theory to the long-run model is the understanding that

• A) economists must support the use of tax policy for long-run growth.
• B) the response of the public to policy changes makes the economy return to long-run equilibrium more quickly.
• C) the long-run model can rarely be applied.
• D) the economy remains in short-run equilibrium longer.