Suppose That Monetary Policymakers Announced That They Were Going to Make

question 110

Multiple Choice

Suppose that monetary policymakers announced that they were going to make a serious effort to fight inflation. A few years later the inflation rate has been reduced, but there had also been a serious recession. Which of the following could we conclude with certainty?

• A)We could conclude that the rational expectations hypothesis is false.
• B)We could conclude that the rational expectations hypothesis is true.
• C)We could conclude that the policymakers lacked credibility.
• D)No conclusion about the rational expectations theory or the policymakers' credibility can be drawn with certainty.

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Definitions:

Appositional Growth

A method of growth by which new layers are added on the surfaces of existing tissues, seen in bone and cartilage development.

Electrical Charge

A physical property that causes matter to experience a force when placed in an electromagnetic field, characterized by being positive or negative.

Osteoblasts

Cells with the primary function of synthesizing bone, playing an essential role in bone growth and repair.

Electrical Charges

Properties of particles that give rise to electric forces; positive and negative charges attract each other, while like charges repel.