Which of the following statements was probably made by an adherent of rational expectations?
A)It is rational to pursue any full employment policy because more employment is better than less.
B)Unemployment is clearly a case of market failure.
C)Programs designed to stimulate employment will only stimulate the price level with no employment gain.
D)It is inhumane to have a single person unemployed whatever the inflation cost.

Question

Which of the following statements was probably made by an adherent of rational expectations?
A)​It is rational to pursue any full employment policy because more employment is better than less.
B)​Unemployment is clearly a case of market failure.
C)​Programs designed to stimulate employment will only stimulate the price level with no employment gain.
D)​It is inhumane to have a single person unemployed whatever the inflation cost.

Quizplus · Accepted Answer

An adherent of rational expectations would likely believe that programs designed to stimulate employment will not be effective because individuals and businesses will adjust their behavior in anticipation of these programs, resulting in higher prices without any meaningful increase in employment. Thus, statement C is the most consistent with this perspective. Statements A and D do not reflect an understanding of the trade-offs between employment and inflation, and statement B does not necessarily reflect a belief in rational expectations theory.

Which of the Following Statements Was Probably Made by an Adherent