The Theorists of the Rational Expectations School _____

question 169

Multiple Choice

The theorists of the rational expectations school _____

• A) favor monetary rules because they believe individuals know too little about how the economy works.
• B) favor monetary rules so that workers and firms do not get any unanticipated surprises from the Fed.
• C) are those who favor an "active approach" to policy and reject monetary rules.
• D) oppose monetary rules because they believe rules impede the natural self-correcting mechanism of the economy.
• E) believe in implementing discretionary policies.

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Definitions:

Paradox of Voting

A situation in which the cost of voting (time, effort) appears to outweigh the individual benefits, making it rational for people not to vote, yet people still vote.

Marginal Cost

The outlay involved in producing an extra unit of a product or service.

Marginal Benefit

The increased pleasure or benefit received from consuming an additional unit of a product or service.

Stadium

A large, often outdoor structure for sports, concerts, or other events, featuring tiers of seats for spectators.