If the Public Has Rational Expectations, an Attempt to Increase

question 21

Multiple Choice

If the public has rational expectations, an attempt to increase aggregate demand to stimulate the economy will:

• A)be less inflationary in the short run than if the public alters their expectations slowly in response to changes in government policy.
• B)be more effective than if the public alters their expectations slowly in response to changes in government policy.
• C)be ineffective if the shift in aggregate demand is predictable.
• D)be all of the above.

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Definitions:

Milgram Experiment

A psychological experiment conducted by Stanley Milgram in the 1960s to study obedience to authority, where participants were instructed to administer electric shocks to another person.

Stanford University Prison Experiment

A psychological study conducted by Philip Zimbardo in 1971 at Stanford University, where students were assigned roles of prisoners and guards to explore the effects of perceived power.

Generalization

Drawing a conclusion about a certain characteristic of a population based on a sample from it.

Logical Support

The provision of reasons or evidence to justify a claim or argument.