According to the Rational Expectationists

question 192

Multiple Choice

According to the rational expectationists,

• A)individuals and business firms quickly anticipate government policy.
• B)even if there were a recession or substantial inflation,the best government policy would be to do nothing.
• C)the dramatic oil price shocks of 1973 and 1979 created declines in aggregate supply,lowering the natural level of real GDP.
• D)at best,government anti-recessionary policies would have no effect whatsoever.
• E)All of the choices agree with the thought of rational expectationists.

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Definitions:

Democratization

The process of making a political system more democratic, typically involving the transition from an authoritarian regime to a democratic one.

XYZ Affair

Affair in which French foreign minister Talleyrand’s three anonymous agents demanded payments to stop French plundering of American ships in 1797; refusal to pay the bribe was followed by two years of undeclared sea war with France (1798–1800).

Judicial Review

The power of courts to assess the constitutionality of legislative acts or governmental actions and to overrule those that are found unconstitutional.

Mob Rule

A situation in which control is taken away from duly elected authorities or established rules and instead is exercised by the masses or crowds, often leading to chaos and disorder.