The Contribution of Rational Expectations Theory to the Long-Run Model

question 170

Multiple Choice

The contribution of rational expectations theory to the long-run model is the understanding that:

• A) economists must support the use of tax policy for long-run growth.
• B) the response of the public to policy changes makes the economy return to long-run equilibrium more quickly.
• C) the long-run model can rarely be applied.
• D) the economy remains in short-run equilibrium longer.

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