Those Who Accept Both the Rational Expectations Hypothesis and the Assumption

question 111

Multiple Choice

Those who accept both the rational expectations hypothesis and the assumption of flexibility of wages and price would likely argue that

• A) saving and investment do not contribute to economic growth.
• B) active policy making does not contribute to economic stability.
• C) if policy makers are willing to accept a high inflation rate, they can reduce unemployment to a point below the natural rate.
• D) policy makers can eliminate fluctuations in the level of business activity with careful planning of a widely publicized monetary policy.

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Definitions:

Operating Expenses

Expenses incurred from normal business operations, excluding the cost of goods sold, such as selling, general, and administrative expenses.

Minimum Required Rate of Return

The lowest acceptable return on an investment, determined by the investor's or company's financial requirements, risk assessment, and other factors.

Turnover

The total sales or revenue generated by a business within a specific period, or the rate at which inventory or assets are replaced.

Net Operating Income

The net income of a company before taxes and interest are taken out, but after operational costs have been deducted.