Which of the Following Is True About Rational Expectations

question 82

Multiple Choice

Which of the following is true about rational expectations?

• A)People form expectations on the basis of information about past as well as future actions of policy makers.
• B)Wage agreements do not reflect inflationary expectations if workers expect continued inflation.
• C)Rational people cannot easily anticipate the effects of discretionary policy on the price level and output.
• D)The role of expectations is applicable in the context of monetary policy only.
• E)The effectiveness of a particular government policy is independent of people's expectations.

---

Definitions:

Annual Payments

Annual payments refer to the total amount of money paid or to be paid each year, which might include rent, interest, or salaries.

Interest Rate

The percentage of a loan amount charged for borrowing money, expressing the cost of debt.

Present Value

Today’s value of a prospective amount of money or cash flow series, determined by a predefined rate of return.

Payment Options

Various methods available for consumers to make transactions, such as cash, credit cards, and electronic transfers.