Economists Who Subscribe to the Rational Expectations Hypothesis

Multiple Choice

Economists who subscribe to the rational expectations hypothesis

A) base their belief on the economic assumption that people behave in ways that maximize their utility.
B) believe that governments can influence macroeconomic outcomes better than the private sector.
C) argue that discretionary monetary and fiscal policy can control fluctuations in economic activity adequately.
D) say that people are constantly revising their expectations about future prices based on what transpired in the past and therefore over time, fluctuations in economic activity will cease to occur.