Which of the Following Is True of Rational Expectations

question 57

Multiple Choice

Which of the following is true of rational expectations?

• A) People form expectations on the basis of information about past as well as future actions of policy makers.
• B) Wage agreements do not reflect inflationary expectations if workers expect continued inflation.
• C) Rational people cannot easily anticipate the effects of discretionary policy on the price level and output.
• D) The role of expectations is applicable only in the context of monetary policy.
• E) The effectiveness of a particular government policy is independent of people's expectations.

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Definitions:

Conventional Bank

A financial institution that provides a range of traditional banking services, including accepting deposits and making loans, operating within a regulatory framework.

Consumers

Individuals or groups who purchase goods and services for personal use and not for manufacture or resale.

Commercial Letter

A formal letter used in the business context for communications between companies, or between a company and its customers, suppliers, or partners.

Written Commitment

A formally documented promise or agreement, often legally binding, outlining specific actions or behaviors.