Multiple Choice
Which of the following is true of rational expectations?
A) People form expectations on the basis of information about past as well as future actions of policy makers.
B) Wage agreements do not reflect inflationary expectations if workers expect continued inflation.
C) Rational people cannot easily anticipate the effects of discretionary policy on the price level and output.
D) The role of expectations is applicable only in the context of monetary policy.
E) The effectiveness of a particular government policy is independent of people's expectations.
Correct Answer:
Verified
Correct Answer:
Verified
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