Multiple Choice
A conclusion of the theory of rational expectations is that, in the short run, the impact of discretionary fiscal policies designed to shift the AD curve will:
A) result in no net change in AD once people's expectations adjustments have been accounted for.
B) shift AD in the opposite direction intended once people's expectations adjustments have been accounted for.
C) be anticipated and compensated for, causing no significant effect on real GDP or employment if people's anticipations are correct.
D) have to be anticipated to change real output in the intended direction.
Correct Answer:
Verified
Correct Answer:
Verified
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