The Rational Expectations Hypothesis Implies That Use of Discretionary Macro-Policy

question 160

Multiple Choice

The rational expectations hypothesis implies that use of discretionary macro-policy as a stabilization tool will

• A) be ineffective, even in the short run.
• B) be effective in the short run but ineffective in the long run.
• C) be effective both in the short run and long run.
• D) make it possible to trade-off a higher rate of inflation for a lower rate of unemployment.

---

Definitions:

Making Friends

The process of building social connections or bonds between individuals.

Decision-Making Process

The steps involved in choosing between alternatives to achieve a goal, encompassing problem identification, analysis, options evaluation, and selecting the best solution.

Orders

Instructions or commands given by an authority, or requests for goods or services in commerce.

Productivity

The measure of efficiency in which goods and services are produced, often within a specific period.