A conclusion of the theory of rational expectations is that, in the short run, the impact of discretionary fiscal policies designed to shift the AD curve will:
A)result in no net change in AD once people's expectations adjustments have been accounted for.
B)shift AD in the opposite direction intended once people's expectations adjustments have been accounted for.
C)be anticipated and compensated for, causing no significant effect on real or nominal GDP or employment.
D)have to be a surprise to change real output in the intended direction.

Question

A conclusion of the theory of rational expectations is that, in the short run, the impact of discretionary fiscal policies designed to shift the AD curve will:
A)​result in no net change in AD once people's expectations adjustments have been accounted for.
B)​shift AD in the opposite direction intended once people's expectations adjustments have been accounted for.
C)​be anticipated and compensated for, causing no significant effect on real or nominal GDP or employment.
D)​have to be a surprise to change real output in the intended direction.

Quizplus · Accepted Answer

The Answer of A conclusion of the theory of rational expectations is that, in the short run, the impact of discretionary fiscal policies designed to shift the AD curve will:
A)​result in no net change in AD once people's expectations adjustments have been accounted for.
B)​shift AD in the opposite direction intended once people's expectations adjustments have been accounted for.
C)​be anticipated and compensated for, causing no significant effect on real or nominal GDP or employment.
D)​have to be a surprise to change real output in the intended direction.

A Conclusion of the Theory of Rational Expectations Is That