The primary argument against the rational-expectations assumption is that
A. it assumes that unexploited opportunities for profit persist in the economy.
B. people expect certain outcomes from the government's policy actions.
C. the costs of formulating rational expectations are very low.
D. it requires households and firms to know too much.
Answer: D
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Which of the following explains why the aggregate demand curve is downward sloping?
A) the open economy effect B) the real-balance effect C) the interest rate effect D) all of the above
Suppose that there is an increase in expected future disposable income and simultaneously an increase in the expected profitability of investment
As a result, the equilibrium real interest rate ________ and the equilibrium quantity of loanable funds ________. A) rises; decreases B) falls; might increase, decrease, or not change C) rises; might increase, decrease, or not change D) rises; increases E) falls; increases
The Fed's inability to instantaneously observe changes in inflation and economic growth result in
A) information lag. B) impact lag. C) policy lag. D) jet lag.
The model of perfect competition can be fruitfully used to analyze markets that don't perfectly fit the description of this market type
a. True. b. False.