The Rational Expectations Hypothesis Suggests That If Wages and Prices

question 158

Multiple Choice

The rational expectations hypothesis suggests that if wages and prices are flexible

• A) unanticipated monetary policy actions can shift the long-run aggregate supply curve but cannot shift the aggregate demand curve.
• B) anticipated monetary policy actions can affect nominal variables, but not real variables.
• C) unanticipated monetary policy actions can affect real variables, but not nominal variables.
• D) growth in the money supply can alter real variables only if the growth is anticipated.

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Definitions:

Binomial Experiment

A statistical experiment that meets the criteria of having a fixed number of trials, each with two possible outcomes, independent trials, and a constant probability of success.

Independent Trials

Refers to experiments or processes in which the outcome of any given trial does not affect the outcomes of future or past trials.

Probability of Success

The likelihood of achieving a desired outcome or event.

Binomial Distribution

A probability distribution that represents the number of successes in a set number of independent binary (success/failure) experiments.