According to Rational Expectations Theory

question 96

Multiple Choice

According to rational expectations theory:

• A)​a large reduction in unemployment can be achieved with a relatively small increase in inflation.
• B)​people are not easily fooled by changes in government fiscal policy.
• C)​inflation rates that rise 3 percentage points each year will keep unemployment below its natural rate for a sustained period of time.
• D)​the Phillips curve will slope downward to the right, if people correctly anticipate the inflation rate.

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Definitions:

Probability Assignment

An academic or educational task involving the calculation or analysis of probabilities concerning certain events or scenarios.

Legitimate

Something that is lawful, justified, and recognized as valid or conforming to established rules and standards.

Joint Frequency Distribution

A statistical representation showing the frequency of combined occurrences of two or more variables.

Contingency Table

A tool used in statistics to analyze and display the frequency distribution of variables, showing the number of observations for each combination of categories.