A Conclusion of the Theory of Rational Expectations Is That

question 42

Multiple Choice

A conclusion of the theory of rational expectations is that, in the short run, the impact of discretionary fiscal policies designed to shift the AD curve will:

• A)​result in no net change in AD once people's expectations adjustments have been accounted for.
• B)​shift AD in the opposite direction intended once people's expectations adjustments have been accounted for.
• C)​be anticipated and compensated for, causing no significant effect on real GDP or employment if people's anticipations are correct.
• D)​have to be anticipated to change real output in the intended direction.

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Definitions:

Resource Suppliers

Entities or individuals that provide the necessary inputs (like raw materials, labor, and capital) for production processes.

Marginal Product

The additional output resulting from the use of one more unit of a production input.

Newly Built Homes

Houses that have been recently constructed and are ready for occupancy, often indicating new developments in housing markets.

Construction Workers

Laborers specifically trained to work on construction sites, handling various tasks from basic site preparation to finishing work.