A Mainstream Criticism of Rational Expectations Theory Is That

question 42

Multiple Choice

A mainstream criticism of rational expectations theory is that

• A) the theorists confuse correlation with causation in interpreting the empirical evidence.
• B) people do not make consistent forecasting errors that can be exploited by policymakers.
• C) many markets are not purely competitive and do not adjust rapidly to changing market conditions.
• D) the data indicate that economic policy does not affect real GDP and employment.

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