Which of the following is true?
A)Rational expectation theorists believe that an anticipated change in policies can alter real GDP in the short run.
B)Rational expectation theorists believe that an unanticipated change in policies can alter real GDP in the long run.
C)Rational expectation theorists believe that government economic policies designed to alter aggregate demand are effective at changing real output.
D)Activists believe that appropriate economic policies can alter aggregate demand.
E)Activists believe that economic policies cannot keep the rate of unemployment below the natural rate.

Question

Quizplus · Accepted Answer

Activists believe that appropriate economic policies, such as changes in taxes, government spending, and monetary policy, can alter aggregate demand and help to stabilize the economy. This view contrasts with the rational expectation theory, which assumes that individuals are forward-looking and will anticipate the effects of any policy changes, thereby limiting their impact on the economy. However, rational expectation theorists do not believe that anticipated or unanticipated policy changes can alter real GDP in the short or long run. Finally, activists also believe that policies can be effective at keeping the rate of unemployment below the natural rate, although this may involve trade-offs with respect to inflation.

Which of the Following Is True