Which of the following is false?
A)If people can anticipate the plans of policy makers and alter their behavior quickly, their behavior could neutralize the intended impact of government action on real GDP.
B)The theory of rational expectations leads to optimistic conclusions regarding macroeconomic policy's ability to achieve its intended economic goals.
C)Rational expectation economists believe that wages and prices are flexible, and that workers and consumers incorporate the likely consequences of government policy changes quickly into their expectations.
D)Catching consumers and businessmen off-guard with macroeconomic policy changes gets harder the more you try to do it.

Question

Which of the following is false?
A)​If people can anticipate the plans of policy makers and alter their behavior quickly, their behavior could neutralize the intended impact of government action on real GDP.
B)​The theory of rational expectations leads to optimistic conclusions regarding macroeconomic policy's ability to achieve its intended economic goals.
C)​Rational expectation economists believe that wages and prices are flexible, and that workers and consumers incorporate the likely consequences of government policy changes quickly into their expectations.
D)​Catching consumers and businessmen off-guard with macroeconomic policy changes gets harder the more you try to do it.

Quizplus · Accepted Answer

The theory of rational expectations suggests that people have rational expectations and will use all available information to make decisions. This means that people will anticipate the effects of macroeconomic policies and change their behavior accordingly. As a result, macroeconomic policies may not have the intended impact on the economy. Therefore, the theory of rational expectations leads to pessimistic conclusions regarding macroeconomic policy's ability to achieve its intended economic goals.

Which of the Following Is False