According to the Theory of Rational Expectations,the "Fooling" of Workers

question 49

Multiple Choice

According to the theory of rational expectations,the "fooling" of workers in Friedman's model

• A)is rational,since sudden unforeseeable changes in aggregate demand can and do occur.
• B)is rational,since workers are always on their labor supply curve.
• C)is not rational,since workers should learn to immediately link unexpected wage changes to wrongly-forecast price levels.
• D)is not rational,since workers are often thrown off of their labor supply curve.

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Definitions:

William James

An American philosopher and psychologist, often referred to as the father of American psychology, known for his works on pragmatism and the psychology of consciousness.

Charles Darwin

Charles Darwin was a 19th-century naturalist who formulated the theory of evolution by natural selection, explaining how species adapt and change over time.

Adaptation-level Phenomenon

The psychological process by which individuals adjust their expectations based on past experiences, influencing their perception of new stimuli.

Money

A medium of exchange, in the form of coins and banknotes; used to facilitate transactions for goods and services.