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:

Quantitative Research

Research methods emphasizing objective measurements and statistical or numerical analysis of data collected through polls, questionnaires, and surveys.

Text Messaging

The process of sending short electronic messages between mobile phones or other digital devices.

Triangulation

An approach in which more than one research method is used in an attempt to more fully understand an area of study.

Mixed Methods

An approach in which both quantitative and qualitative procedures are used.