The Rational Expectations Hypothesis Implies That When Macroeconomic Policy Changes

question 12

Multiple Choice

The rational expectations hypothesis implies that when macroeconomic policy changes

• A)the economy will become highly unstable.
• B)the way expectations are formed will change.
• C)people will be slow to catch on to the change.
• D)people will make systematic mistakes.

---

Definitions:

Interpretation Expectation

The anticipation of how a message, action, or result will be perceived and understood by others.

Perceptual Selection

The process by which individuals screen out or modify various stimuli from the environment to make it more manageable and meaningful to them.

Internal Factor

Elements within an organization that can influence its operation and success, such as employees, culture, and internal processes.

Person Perception

The process by which individuals form impressions of others based on information gathered through observation and interaction.