Which of the following is false?
A)If people can anticipate the plans of policy makers and alter their behavior quickly, their behavior could neutralize the intended impact of government action on real GDP.
B)The theory of rational expectations leads to optimistic conclusions regarding macroeconomic policy's ability to achieve its intended economic goals.
C)Rational expectation economists believe that wages and prices are flexible, and that workers and consumers incorporate the likely consequences of government policy changes quickly into their expectations.
D)Catching consumers and businessmen off-guard with macroeconomic policy changes gets harder the more you try to do it.
E)None of the above are false; all are true.

Question

Quizplus · Accepted Answer

The theory of rational expectations does not necessarily lead to optimistic conclusions about macroeconomic policy's ability to achieve its intended goals. The theory simply suggests that economic agents use all available information, including past experience and current policy announcements, to form expectations about future economic conditions. Rational expectations do not guarantee that government policy will always be effective in achieving its intended targets.

Which of the Following Is False