According to the Rational Expectations View, the Government Has the Ability

question 1

Multiple Choice

According to the rational expectations view, the government has the ability to control the level of real output and unemployment:

• A)only in the short run if it makes unexpected changes in aggregate demand
• B)only in the short run if it announces policies well in advance so that expectations are affected
• C)only in the long run if it shifts aggregate supply instead of aggregate demand
• D)only in the long run if it uses monetary policy instead of fiscal policy
• E)only in the long run when the aggregate supply curve is vertical