The Rational Expectations Theory Indicates That Expansionary Policy Will

question 46

Multiple Choice

The rational expectations theory indicates that expansionary policy will

• A) stimulate real output in the long run but not in the short run.
• B) expand real output and employment if the public quickly anticipates the effects of the expansionary policy.
• C) equalize real and nominal interest rates during lengthy periods of inflation.
• D) fail to increase employment because individuals will anticipate it and take actions that will offset its impact.

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Definitions:

Family Life Cycle

The distinct phases that a family progresses through from formation to retirement, each phase bringing with it identifiable purchasing behaviors.

Middle-aged Couples

Partners typically ranging from about 45 to 65 years old, often facing the transition to empty-nesting or retirement.

Family Decision Making

The process by which decisions are made in a household, involving multiple family members with their respective influences and roles.

Joint Decision Making

A process in which multiple parties collaborate to make a decision, often seen in families or organizations.