Which of the Following Is an Implication of Rational Expectations

Multiple Choice

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

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