Those Who Accept Both the Rational Expectations Hypothesis and the Assumption

question 111

Multiple Choice

Those who accept both the rational expectations hypothesis and the assumption of flexibility of wages and price would likely argue that

• A) saving and investment do not contribute to economic growth.
• B) active policy making does not contribute to economic stability.
• C) if policy makers are willing to accept a high inflation rate, they can reduce unemployment to a point below the natural rate.
• D) policy makers can eliminate fluctuations in the level of business activity with careful planning of a widely publicized monetary policy.

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Definitions:

Huron Indians

A large North American Indigenous group, historically located in the Great Lakes region, known for their farming, trading, and strong societal organization.

John Rolfe

An early English settler in Virginia who is credited with the first successful cultivation of tobacco as a cash crop, which significantly influenced the colony's economy.

Pocahontas

A Native American woman notable for her association with the colonial settlement at Jamestown, Virginia, and her role in fostering peace between Native Americans and English settlers.

Peaceful Co-Existence

A principle suggesting that nations or ideologies with differing viewpoints can live alongside each other without conflict, often associated with Cold War era diplomacy.