If Expectations Are Rational, Can Monetary and Fiscal Policy Makers

question 34

Multiple Choice

If expectations are rational, can monetary and fiscal policy makers accurately control the effects their policies have on unemployment?

• A)​Yes, provided they announce policies in advance.
• B)​Yes, both policies are effective in altering unemployment in the desired ways.
• C)​No, because these effects depend on whether and to what extent people are fooled by those policies.
• D)​No, only fiscal policy can alter unemployment.

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Definitions:

Taxes

Compulsory charges imposed by governments on individuals or entities to fund public services and infrastructure.

Investing Activity

Transactions involving the purchase and sale of long-term assets and investments, part of a company's cash flow statement that indicates how funds are used and generated.

Corporation

Business organization that is both a legal and accounting entity.

Operating Activities

Business activities directly related to the production and delivery of goods and services, which are reflected in the cash flow statement.