The Contribution of the Rational Expectations Theory to the Long-Run

question 104

Multiple Choice

The contribution of the rational expectations theory to the long-run model is the understanding that

• A) economists must support the use of tax policy for long-run growth.
• B) the response of the public to policy changes makes the economy return to long-run equilibrium more quickly.
• C) the long-run model can rarely be applied.
• D) the economy remains in short-run equilibrium longer.

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Definitions:

Accounts Receivable

The money owed to a company by its customers for goods or services that have been delivered but not yet paid for.

Face Value

The nominal or dollar value printed on a security such as a bond or stock, representing its legal value.

Note

A financial instrument acknowledging debt, with terms including interest rate and repayment schedule.

Short-Term Notes Receivable

Current assets representing written promises for amounts to be received within a short period, typically within a year.