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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