The Proponents of Rational Expectations Believe That

question 79

Multiple Choice

The proponents of rational expectations believe that

• A) there will be a substantial time lag before people anticipate the eventual effects of a shift to a more expansionary macro-policy.
• B) macro-policies that stimulate demand and place upward pressure on the general level of prices will temporarily increase output and employment.
• C) the inflationary side effects of expansionary policies will be anticipated quickly, and therefore, even their short-run effects on real output and employment will be minimal.
• D) discretionary changes in macro-policy can be made in a manner that will reduce the economic ups and downs of a market economy.

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