If the Public Has Rational Expectations, an Attempt to Increase

question 105

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 if the public alters their expectations quickly in response to changes in government policy.
• C)​be ineffective if the shift in aggregate demand is predictable.
• D)​all of the above.

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