According to Rational Expectations Theory

Multiple Choice

According to rational expectations theory:

A) ​a large reduction in unemployment can be achieved with a relatively small increase in inflation.
B) ​people are not easily fooled by changes in government fiscal policy.
C) ​inflation rates that rise 3 percentage points each year will keep unemployment below its natural rate for a sustained period of time.
D) ​the Phillips curve will slope downward to the right, if people correctly anticipate the inflation rate.