Critics of the Rational Expectations Theory Believe That

Multiple Choice

Critics of the rational expectations theory believe that:

A) most people are well informed about the effects of a policy change.
B) most people adjust their behavior very rapidly to changes in government policies even if they are not informed about the effects of policy changes.
C) wages and prices are not as flexible as the rational expectations theory assumes.
D) expected changes affect real output and employment in the long run.
E) unexpected changes in policies do not affect real output and employment in the short run as the rational expectations theory assumes.