Under the Rational Expectations Hypothesis, If Wages Adjust Rapidly to New

question 130

Multiple Choice

Under the rational expectations hypothesis, if wages adjust rapidly to new information about intended policy actions, monetary policy can have an effect

• A) in both the short and the long run.
• B) in the long run, but not the short run.
• C) only in the short run and only if the policy is unanticipated.
• D) only in the long run and only if the policy is fully anticipated.

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