One of the Basic Assumptions of Rational Expectations Theory Is

question 44

Multiple Choice

One of the basic assumptions of rational expectations theory is that

• A) people can anticipate the future effects of policy changes and the actions they take may offset the effects of economic policy.
• B) people are not able to assess the future effects of policy changes, so government can use economic policy effectively.
• C) markets are not very competitive and fail to adjust quickly to changes in demand and supply.
• D) people expect government to solve the major unemployment and inflation problems facing the nation and behave accordingly.

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Definitions:

Secondary Emotion

Emotions that are not primary and arise from the cognitive appraisal of a situation, often involving a combination of primary emotions and thought processes.

Background Emotion

Pertains to the subtle, persistent emotional states that are not the focal point of consciousness but influence mood and perception.

Secondary Emotion

An emotion that develops from primary emotions, involving a more complex mental processing, such as guilt, shame, or pride.

Delight

A high degree of pleasure or enjoyment that surprises or greatly pleases someone.