One major conclusion of the rational expectations

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Finite Mathematics and Applied Calculus
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Chapter 5 / Exercise 39
Finite Mathematics and Applied Calculus
Costenoble/Waner
Expert Verified
26.One major conclusion of the rational expectations theory is that:A)macroeconomic policy can be used to fine-tune the economy.B)macroeconomic policy has no impact on GDP even in the short run.C)consumers do not always make rational decisions.D)citizens cannot rationally expect government to pursue the proper economic policy.
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Finite Mathematics and Applied Calculus
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Chapter 5 / Exercise 39
Finite Mathematics and Applied Calculus
Costenoble/Waner
Expert Verified
Use the following to answer questions 27-28:Figure: Understanding Expectation Theories27.(Figure: Understanding Expectation Theories) Assume the economy is at point c. According to the theory of adaptive expectations, if the Fed announces and then implements a contractionary policy, the economy will move from point c:
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b.28.(Figure: Understanding Expectation Theories) Assume the economy is at point c. According to the theory of rational expectations, if the Fed announces and then starts a plan to practice contractionary policy, the economy will move from point c:
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b.29.The efficiency wage theory states that by paying their employees more than the market-clearing wage, employers hope to:
30.If wages are sticky, then monetary policy actions:Page 7
A)are more effective than if wages were not sticky.B)have to be announced ahead of implementation to have an effect.C)have to be coordinated with union labor contract negotiations.D)have no impact on either prices or GDP.
31.A shortcoming of the rational expectations hypothesis is that:
32.In a jobless recovery:
33.What factor does NOThelp to explain the recent phenomenon of a jobless recovery?
34.Which of the following is an appropriate policy to address a jobless recovery?A)lowering interest rates to reduce the cost of financing major projectsB)increasing taxes to reduce the national debtC)decreasing government spending to bring the deficit under controlD)decreasing the money supply to prevent inflation
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Answer Key1.D2.B3.B4.A5.C6.A7.B8.D9.C10.D11.B12.A13.D14.A15.B16.C17.D18.D19.C20.B21.A22.D23.B24.B25.B26.B27.B28.C29.D30.A31.A32.B33.D34.A
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