Under the Rational Expectations Hypothesis, If Wages Adjust Rapidly to New

question 130

Multiple Choice

Under the rational expectations hypothesis, if wages adjust rapidly to new information about intended policy actions, monetary policy can have an effect

• A) in both the short and the long run.
• B) in the long run, but not the short run.
• C) only in the short run and only if the policy is unanticipated.
• D) only in the long run and only if the policy is fully anticipated.

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Definitions:

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Dominant Culture

The prevailing cultural practices, beliefs, and values that are accepted and enforced by the majority within a society.

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In psychodynamic theory, the process by which libidinal energy is expressed through different erogenous zones during different stages of development.

Libidinal Energy

A term from psychoanalytic theory referring to the psychic energy derived from instinctual biological drives, especially sexual desire.