Those Who Accept Both the Rational Expectations Hypothesis and the Assumption

question 111

Multiple Choice

Those who accept both the rational expectations hypothesis and the assumption of flexibility of wages and price would likely argue that

• A) saving and investment do not contribute to economic growth.
• B) active policy making does not contribute to economic stability.
• C) if policy makers are willing to accept a high inflation rate, they can reduce unemployment to a point below the natural rate.
• D) policy makers can eliminate fluctuations in the level of business activity with careful planning of a widely publicized monetary policy.

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Definitions:

Isotonic Saline

A solution of sodium chloride (salt) in water at a concentration that matches the salt concentration of the body cells and blood, commonly used for medical hydration and wound cleaning.

Extracellular Fluid

The body fluid outside cells, providing a medium for substances to pass between cells and blood vessels.

Resting Membrane Potential

The electrical charge difference across the cellular membrane when a neuron or muscle cell is at rest, typically around -70 mV.

Afterpotential

The electrical changes that occur in a neuron immediately following an action potential, which can affect the neuron's ability to fire again.