The Rational Expectations Theory Indicates That Expansionary Policy Will

question 46

Multiple Choice

The rational expectations theory indicates that expansionary policy will

• A) stimulate real output in the long run but not in the short run.
• B) expand real output and employment if the public quickly anticipates the effects of the expansionary policy.
• C) equalize real and nominal interest rates during lengthy periods of inflation.
• D) fail to increase employment because individuals will anticipate it and take actions that will offset its impact.

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Definitions:

Sociotechnical System

An approach to complex organizational work design that recognizes the interaction between people and technology in workplaces.

Power Base

The source of authority or influence, often used in the context of organizations, politics, or social structures, that an individual, group, or entity possesses.

Business Partnership

A legal form of business operation between two or more individuals who share management and profits.

Shareholder Interests

Refers to the financial and strategic concerns of shareholders, including dividend payments, stock value appreciation, and the governance of the corporation to ensure its success and profitability.