The Rational Expectations Theory States That When Individuals and Firms

question 31

Multiple Choice

The rational expectations theory states that when individuals and firms make decisions, they take everything into account. Thus:

• A) if it's clear that the government intends to trade off higher inflation for lower unemployment, the public will understand this and help the government achieve its goal.
• B) if it's clear that the government intends to trade off higher inflation for lower unemployment, the public will understand this and inflation expectations will immediately rise.
• C) a government attempt to trade off higher inflation for lower unemployment would not work in the short run but would be fine in the long run.
• D) even if people are not expecting inflation and are unaware of government policies, inflation expectations are still going to be embedded.

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Definitions:

Os Coxa

A large, irregular bone forming part of the pelvis, complexly made up of the ilium, ischium, and pubis.

Acetabulum

A deep, cup-shaped structure that forms the socket of the hip joint, receiving the head of the thigh bone (femur).

Iliac Crest

The uppermost edge of the ilium, part of the hip bone, which serves as an attachment point for muscles and ligaments.

Medial Cuneiform

A bone in the foot located at the base of the first metatarsal bone, contributing to the arch of the foot.