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:

Achievement Goals

Objectives related to accomplishing tasks or achieving high standards of performance, which can motivate individuals or determine their approach to tasks.

Putting Effort

The act of applying mental or physical energy towards achieving specific tasks, goals, or outcomes, often associated with determination and hard work.

Little League

A youth sports organization that hosts baseball and softball leagues for children and adolescents.

Inherent Need

A fundamental psychological or physiological requirement essential for the well-being and survival of an individual.