If Expectations Are Formed Rationally,then

question 22

Multiple Choice

If expectations are formed rationally,then

• A) activist monetary policy may yield no gains whatsoever.
• B) monetary policy has real effects in the long run.
• C) inflation will only hurt lenders and not borrowers.
• D) inflation will only hurt borrowers and not lenders.
• E) individuals expect inflation equal to their most recent experience.

---

Definitions:

Lightness Constancy

A visual perception principle where an object's perceived lightness remains constant despite changes in illumination.

Perceptual Adaptation

The capacity of the body to adapt to its surroundings by eliminating distractions.

Phi Phenomenon

The optical illusion of perceiving a series of stationary images in rapid succession as continuous motion.

Christmas Tree Lights

Decorative lights used to adorn Christmas trees, contributing to the festive ambiance of Christmas celebrations.