Suppose a central bank announced that it was going to make a serious effort to fight inflation.A few years later the inflation rate is lower,but there had been a serious recession.We could conclude with certainty that
A)the rational expectations hypothesis is false.
B)the rational expectations hypothesis is true.
C)the policymakers lacked credibility.
D)None of the above is certain.

Question

Quizplus · Accepted Answer

While it is true that the central bank's efforts to fight inflation may have contributed to the recession, it is impossible to conclude with certainty that the rational expectations hypothesis is either true or false, or that the policymakers lacked credibility. Many factors may have contributed to the outcome, including external shocks, changes in government policies, and broader economic conditions. Therefore, none of the statements presented in the answer choices can be regarded as certain under the given circumstances.

Suppose a Central Bank Announced That It Was Going to Make