The Rational Expectations Equilibrium Approach

Multiple Choice

The rational expectations equilibrium approach

A) attempts to build macroeconomic theory on microeconomic foundations
B) was first proposed by Gregory Mankiw
C) implies that policy changes always significantly affect output since people understand how it works
D) assumes that disturbances caused by real shocks are long in duration since they have to work their way through different markets
E) was developed in the 1960s, but was given little attention since most economists rejected the idea of rational expectations