Which of the Following Is an Implication of Rational Expectations

question 47

Multiple Choice

Which of the following is an implication of rational expectations theory?

• A)deviations of output from the natural rate are likely to be serious and long-lived.
• B)the economy is like a complex machine,that needs to be optimally controlled with the proper policy.
• C)macroeconometric models based on past behavior will not be very useful in formulating policy.
• D)wages and prices are set almost entirely at random,so it is pointless to try to model their behavior.
• E)business cycles almost always result from a shift in aggregate demand.

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