The Theory of Rational Expectations Is Consistent with Which Statement

question 9

Multiple Choice

The theory of rational expectations is consistent with which statement?

• A) It takes into account only current information about inflation.
• B) It takes into account only past information about inflation.
• C) It takes into account past rates of inflation and available information about monetary and fiscal policy.
• D) A government attempt to trade off higher inflation for lower unemployment would work in the short run but would eventually fail because higher inflation would get built into expectations.

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Definitions:

Pessimistic Outlook

A tendency to expect the worst possible outcome or to emphasize the most negative aspects of any situation.

Abusive Environment

A setting where an individual is subjected to harmful, violent, or demeaning behavior, often leading to psychological, physical, or emotional damage.

Non-Hispanic White

Non-Hispanic White refers to people in the United States who identify as white and are not of Hispanic or Latino origin, as classified by demographic and census data.

Socioeconomic Status

A measure of an individual's or family's social position and economic level relative to others, based on income, education, and occupation.