Rational expectation theory implies that accurately anticipated change in aggregate demand:
A)will increase RGDP in the short run.
B)will affect RGDP and inflation only in the long run.
C)may affect RGDP but not nominal GDP in the short run.
D)will do none of the above.

Question

Rational expectation theory implies that accurately anticipated change in aggregate demand:
A)​will increase RGDP in the short run.
B)​will affect RGDP and inflation only in the long run.
C)​may affect RGDP but not nominal GDP in the short run.
D)​will do none of the above.

Quizplus · Accepted Answer

Rational expectation theory suggests that if changes in aggregate demand are accurately anticipated, individuals and firms will adjust their behavior accordingly, neutralizing any impact on real GDP in both the short and long run.

Rational Expectation Theory Implies That Accurately Anticipated Change in Aggregate