If People Form Expectations in Accordance with the Rational Expectations

question 11

Multiple Choice

If people form expectations in accordance with the rational expectations hypothesis and they correctly anticipate policy actions, then the policies will:

• A) not impact output in either the short run or the long run.
• B) impact output in both the short run and the long run.
• C) impact output in the short run but have no effect in the long run.
• D) impact output in the long run but have no effect in the short run.

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Definitions:

Research Participants

Individuals who take part in scientific studies, providing data for analysis and insights into various research questions.

Causes and Effects

A relationship between two phenomena where one (the cause) directly results in the other (the effect).

Experiments

A scientific procedure undertaken to make a discovery, test a hypothesis, or demonstrate a known fact.

Research Methods

The systematic techniques and tools used to gather, analyze, and interpret data in order to draw conclusions.