Critics of the Rational Expectations Theory Believe That

question 26

Multiple Choice

Critics of the rational expectations theory believe that:

• A)most people are well informed about the effects of a policy change.
• B)most people adjust their behavior very rapidly to changes in government policies even if they are not informed about the effects of policy changes.
• C)wages and prices are not as flexible as the rational expectations theory assumes.
• D)expected changes affect real output and employment in the long run.
• E)unexpected changes in policies do not affect real output and employment in the short run as the rational expectations theory assumes.

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Definitions:

Tanglewood

A famous music venue in Massachusetts known for its classical music concerts and as the summer home of the Boston Symphony Orchestra.

Alcoholics Anonymous

A worldwide fellowship that supports individuals in recovery from alcohol addiction through a 12-step program.

Holocaust

The genocide of approximately six million Jews and millions of others by the Nazi regime and its collaborators during World War II.

Nazis

Members of the National Socialist German Workers' Party, a far-right political group that ruled Germany from 1933 to 1945.