According to the Theory of Rational Expectations, Individuals Will Respond

question 48

Multiple Choice

According to the theory of rational expectations, individuals will respond to expansionary monetary policy by predicting:

• A) a lower rate of inflation.
• B) a higher rate of inflation.
• C) no change in the rate of inflation.
• D) incorrectly what will happen to the price level and employment.

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The process by which individuals interpret and organize sensory information to give meaning to their environment.

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