In the rational expectations theory, a temporary change in real output could result from
A) anticipated price-level changes.
B) a price-level surprise.
C) a coordination failure.
D) insider-outsider relationships.

Question

Quizplus · Accepted Answer

In rational expectations theory, agents base their decisions on all available information, including expectations of future prices and the overall economy. Therefore, a temporary change in real output would only occur if there was a surprise in the actual price level, not if it was anticipated. This would lead to a temporary adjustment in production and output.

In the Rational Expectations Theory, a Temporary Change in Real