What do rational expectations theorists believe? What is their critics' point of view?


Rational expectation economists believe that wages and prices are flexible and thus should be left free from direct government intervention. They also believe that workers and consumers quickly form accurate expectations about the effects of government policies, and adapt to them, which essentially eliminates the ability of government policy to effectively manage or control the economy.

Critics of rational expectation theory believe that most people are not truly informed about the effects of a policy change and therefore do not adjust their behavior very quickly or completely. Additionally, they question whether prices and wages are really that flexible.

Economics

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In 1947, which of the following activities were not made illegal for labor unions to do?

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a. True b. False

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Resources that flow through the circular flow model include all of the following except:

a. land. b. labor. c. capital. d. final goods.

Economics