Which of the Following Statements Is Consistent with the Rational

question 221

Multiple Choice

Which of the following statements is consistent with the rational expectations hypothesis?

• A) When it comes to making personal economic decisions, people rarely behave in a rational manner.
• B) People combine the effects of past policy changes on important economic variables with their own judgment about the future effects of current and future policy changes.
• C) When it comes to making personal economic decisions, people always behave in a rational manner.
• D) Every person in the economy is always correct in her predictions about current and future policy changes.

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