The Theory of Rational Expectations Concludes That

question 235

Multiple Choice

The theory of rational expectations concludes that

• A)since expectations can cause discretionary stabilization policies to be pro-cyclical,it is better to rely upon policy rules.
• B)discretionary monetary policy is a more powerful stabilization device than is discretionary fiscal policy.
• C)discretionary fiscal policy is a more powerful stabilization device than is discretionary monetary policy.
• D)discretionary policies are more effective than rules in stabilizing the economy.

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Definitions:

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Ethnomethodologists

Social scientists who study the ways in which people make sense of their everyday world through the methods they use in social interaction.

Macro

A prefix or term used to describe concepts at a large scale, often in contrast to "micro" which denotes smaller scale phenomena.

Micro Level Practices

refer to behaviors, interactions, and small-scale processes occurring within societies or groups, often focusing on individual or personal dynamics.