The Theory of Rational Expectations Concludes That

question 116

Multiple Choice

The theory of rational expectations concludes that

• A)by reacting to the expected effects of a stabilization policy,the public will tend to negate the impact of that policy.
• B)the public's expectations as to the effects of economic policies will tend to reinforce the effectiveness of those policies.
• C)the public's expectations can influence the outcome of fiscal policy,but not of monetary policy.
• D)the public's expectations can influence the outcome of monetary policy,but not of fiscal policy.

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Definitions:

Tangentially Relevant

Pertains to a matter or subject that is slightly or indirectly related to the core issue or focus.

Statistics

The science dealing with the collection, analysis, interpretation, and presentation of numerical data.

Dissonance Theory

A psychological theory suggesting that individuals experience discomfort (dissonance) arising from inconsistent beliefs, attitudes, or behaviors and are motivated to reduce this discomfort by changing them to achieve consistency.

Enjoyable

Capable of providing pleasure or satisfaction, often used to describe experiences or activities.