According to rational expectations theory, monetary policy will ...

[mwit1967]

According to rational expectations theory, monetary policy will affect output only if it is
 
  A) anticipated.
  B) unanticipated.
  C) a very large change.
  D) a very small change.
  E) a policy that has been tried in the past.

Question 2

Most economists would agree that, unless it incorporates rational expectations or something like it, a model cannot account for
 
  A) the Great Depression.
  B) shifts in aggregate supply.
  C) the relationship between consumption and income.
  D) the stagflation of the 1970s.
  E) the different initial impact of a permanent versus a temporary policy change.

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Answer to Question 1

A

Answer to Question 2

E