If you accept the rational expectations hypothesis as accurate, what would you tell monetary policy makers who ask you how to more effectively manage the economy?
A. Only unanticipated policies will be effective once individuals understand how monetary policy works.
B. Individuals base their economic expectations solely on current information, so repeating policy decisions that have worked in the past is the most effective path to take.
C. Individuals do understand how monetary policy works, so consistency and predictability are the keys to effective policy making.
D. Consumers do not understand the workings of monetary policy, so discretionary and nondiscretionary policies are equally effective.
Answer: A
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Which of the following pairs of lags are typically shorter for monetary policy than for fiscal policy?
a. The recognition lag and the implementation lag b. The effectiveness lag and the decision-making lag c. The decision-making lag and the implementation lag d. The implementation lag and the effectiveness lag e. The recognition lag and the effectiveness lag
An increase in the marginal physical product of capital increases the demand for loanable funds
Indicate whether the statement is true or false
If the marginal cost were $12, how many units of output would this firm produce?
A. 1
B. 2
C. 3
D. 4
In the market for pollution permits, the demand for permits comes from:
A. firms that would prefer to use permits rather than incur abatement costs. B. the Chicago Board of Trade. C. firms with low abatement costs. D. the Environmental Protection Agency.