Most Economists Reject the Theory of Rational Expectations Because

question 59

Multiple Choice

Most economists reject the theory of rational expectations because

• A)expectations adjust very quickly.
• B)workers receive wage increases in advance of inflation.
• C)the short-run aggregate supply curve is vertical.
• D)labor contracts tend to embody past inflation rates.

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Definitions:

Tragedy of the Commons

A situation in a shared-resource system where individual users acting independently according to their own self-interest behave contrary to the common good of all users by depleting or spoiling that resource.

Public Goods Dilemma

A situation in which the consumption of a good by one individual does not reduce its availability to others, leading to potential overuse or depletion.

Fads

Interests or practices followed enthusiastically for a relatively short period of time.

Fashion

The widespread custom or style of behavior and appearance at a particular time or in a particular place.