According to the Theory of Rational Expectations

Multiple Choice

According to the theory of rational expectations,

A) the Phillips curve is upward sloping in the short run and downward sloping in the long run.
B) both in the short and long run, the Phillips curve is horizontal.
C) the sacrifice ratio could be zero because economic agents will very quickly adjust their inflation expectations if they believe policy makers will succeed in reducing inflation.
D) the sacrifice ratio is very high because rational workers will work less if their wages do not rise as quickly as they expect.