A rational-expectations theorist argues for increased government involvement in the economy to ensure stable price and employment growth.

Question

Quizplus · Accepted Answer

A rational-expectations theorist would argue that market forces should be allowed to determine price and employment levels in the economy, rather than government intervention. They believe that individuals and firms make rational decisions based on their expectations of future economic conditions, and that government policies can often have unintended consequences that disrupt these expectations and lead to inefficiencies in the economy. Therefore, a rational-expectations theorist would not argue for increased government involvement in the economy to ensure stable price and employment growth.

A Rational-Expectations Theorist Argues for Increased Government Involvement in the Economy