Which of the following is NOT an inference of the rational expectations hypothesis?
A) Government policy actions have no real effects in the short run unless the actions are unanticipated.
B) Government policy actions have no real effects in the long run.
C) Government policy actions that are anticipated have no real effects in the short run.
D) Government policy actions that are unanticipated have no monetary effects in the short run.

Question

Quizplus · Accepted Answer

The rational expectations hypothesis states that individuals will use all available information, including past experiences and government policy announcements, to form expectations about future economic conditions. Therefore, if a government policy action is unanticipated, it may have real effects in the short run. However, if the policy action is anticipated, it may have no real effects in the short run. Additionally, the hypothesis suggests that government policy actions can have real effects in the long run, contrary to option B. Option D suggests that unanticipated government policy actions have no monetary effects in the short run, which is not an inference of the rational expectations hypothesis.

Which of the Following Is NOT an Inference of the Rational