One Implication of Coupling the Rational Expectations Hypothesis with the Assumption

question 273

Multiple Choice

One implication of coupling the rational expectations hypothesis with the assumption of flexible wages and prices is that

• A) expansionary monetary policy will be effective in combating recessions.
• B) contractionary monetary policy will be effective in combating inflation.
• C) only predictable policy actions by the Fed will have an effect on the real economy.
• D) only unpredictable policy actions by the Fed will have an effect on the real economy.

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