Statement I: According to the rational expectations theory,the prime economic mover is aggregate supply,not aggregate demand.
Statement II: Unlike the "old" classical economists of the 19^th century,the rational expectationists of today believe that government intervention to affect aggregate demand is sometimes necessary.

Question

Quizplus · Accepted Answer

Statement I is true as rational expectations theory does focus on how expectations of future economic conditions influence current economic outcomes, often emphasizing the role of supply-side factors. Statement II is false because rational expectationists generally believe that markets are efficient and that government intervention is often unnecessary or counterproductive, not that it is sometimes necessary.

Statement I: According to the Rational Expectations Theory,the Prime Economic