According to the rational expectations view:
A)the economy will never deviate from the natural rate of unemployment for any anticipated policy.
B)the long-run inflation rate is equal to zero.
C)expected inflation is always less than actual inflation.
D)people use only past information to form expectations about future inflation rates.
E)announced money-growth policies are quite effective in reducing unemployment below its natural rate.

Question

Quizplus · Accepted Answer

According to the rational expectations view, people form their expectations about the future based on all available information including past and current information, and anticipated policies. Therefore, if a policy change is anticipated, it will already be factored into people's expectations, and the economy will adjust accordingly to its natural rate of unemployment.

According to the Rational Expectations View