The Theory of Rational Expectations Concludes That

question 52

Multiple Choice

The theory of rational expectations concludes that

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

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Definitions:

Cash-Out Combinations

Financial strategies or transactions where owners of a business sell their stake in the company, partially or entirely, for cash.

Fair Dealing

A legal doctrine requiring parties to engage in business transactions in a just, equitable, and non-discriminatory manner.

Minority Shareholders

Shareholders who own a smaller portion of a company's shares, compared to majority shareholders, and often have limited influence on company decisions.

Limited Duration

Describes contracts, agreements, or conditions that are effective for a specific, finite period of time.