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

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Definitions:

Convention in Philadelphia

The Convention in Philadelphia, also known as the Constitutional Convention of 1787, was a meeting where the Constitution of the United States was drafted to replace the Articles of Confederation.

Rhode Island

The smallest U.S. state by area, known for its sandy shores and seaside colonial towns. It played a significant role in the American Revolution.

Massachusetts

A state in the northeastern United States, known for its significant historical sites related to the early history of the nation.

Virginia

A state in the southeastern and Mid-Atlantic regions of the United States, known for its significant historical landmarks.