A Shortcoming of the Rational Expectations Hypothesis Is That

question 11

Multiple Choice

A shortcoming of the rational expectations hypothesis is that

• A) it ignores short-term wage stickiness.
• B) people prefer rational ignorance in making decisions.
• C) it ignores the role of saving.
• D) it is inconsistent with the long-run Phillips curve.

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Definitions:

Excise Tax

A tax levied on certain goods and commodities produced or sold within a country and on licenses granted for certain activities.

Consumers

Consumers are individuals or organizations that use economic goods or services, driving demand in the economy through their purchasing choices and preferences.

Producers

Producers are individuals or entities that create goods or provide services.

Efficiency Loss

The loss of economic efficiency that can occur when the balance between supply and demand is not achieved or is interfered with.