According to Rational Expectations Theory, Monetary Policy Will Affect Output

question 46

Multiple Choice

According to rational expectations theory, monetary policy will affect output only if it is:

• A) a policy that has been tried in the past.
• B) unanticipated.
• C) a very small change.
• D) a very large change.
• E) anticipated.

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Definitions:

Fair Value

A financial term referring to the estimated market value of an asset, based on current market prices.

Available For Sale

A classification for financial assets indicating that they are neither held for trading purposes nor intended to be held to maturity, implying they can be sold to meet liquidity needs or strategic goals.

Idle Funds

Money that is not currently invested or used in transactions, potentially earning no interest or profit.

Semiannually

Occurring or calculated twice a year.