The rational expectations hypothesis is based on the assumption that
A) individuals combine effects of past policy actions with their own judgment about future policy effects and changes when forming their expectations.
B) individuals adapt in response to past policy actions and changes without looking ahead when forming their expectations.
C) firms pay above equilibrium wages to their employees.
D) most firms operate in a less than competitive environment.
Correct Answer:
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Q214: Q215: Those who accept both the rational expectations Q216: Real business cycle theory emphasizes the effect Q217: According to the theory based on rational Q218: The policy irrelevance proposition suggests that the Q220: The hypothesis suggesting that people combine the Q221: During the 1960s, many Keynesian economists felt Q222: The real business cycle theory Q223: Stagflation means a Q224: Using a graph, show and explain the
A) is an
A) high rate of inflation
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