Statement I: A monetarist might oppose the use of expansionary monetary policy to pull the economy out of a recession by arguing that the resulting increase in output and employment would be brief,but the resulting increased inflation would be a long-term problem.
Statement II: According to rational expectations theory,when people expect government to carry out a policy,the policy will have a greater effect on output and employment.

Question

Quizplus · Accepted Answer

Monetarists believe that expansionary monetary policy will only lead to inflation in the long run and will not have any sustainable impact on output and employment. Rational expectations theory suggests that if people expect a certain policy, it will already be factored into their decision-making, and the policy may not have the desired effect on output and employment. Hence, statement I is true, and statement II is false.

Statement I: a Monetarist Might Oppose the Use of Expansionary