Author Question: What is the difference between the Keynesian and rational expectations theories concerning the ... (Read 61 times)

SGallaher96

  • Hero Member
  • *****
  • Posts: 509
What is the difference between the Keynesian and rational expectations theories concerning the success of stabilization policy?

Question 2

If consumers reduce the purchase of goods whose relative prices rise (substitution bias), the consumer price index (CPI) will tend to have an upward bias over time (overstates inflation).
 a. True
  b. False
  Indicate whether the statement is true or false



aliotak

  • Sr. Member
  • ****
  • Posts: 326
Answer to Question 1

The Keynesians believe that government can affect real GDP and employment. The rational expectationists believe that government stabilization policies have no effect on real GDP or employment. The only effect is on the price level.

Answer to Question 2

True



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
 

Did you know?

Liver spots have nothing whatsoever to do with the liver. They are a type of freckles commonly seen in older adults who have been out in the sun without sufficient sunscreen.

Did you know?

More than 34,000 trademarked medication names and more than 10,000 generic medication names are in use in the United States.

Did you know?

Over time, chronic hepatitis B virus and hepatitis C virus infections can progress to advanced liver disease, liver failure, and hepatocellular carcinoma. Unlike other forms, more than 80% of hepatitis C infections become chronic and lead to liver disease. When combined with hepatitis B, hepatitis C now accounts for 75% percent of all cases of liver disease around the world. Liver failure caused by hepatitis C is now leading cause of liver transplants in the United States.

Did you know?

Normal urine is sterile. It contains fluids, salts, and waste products. It is free of bacteria, viruses, and fungi.

Did you know?

The average person is easily confused by the terms pharmaceutics and pharmacology, thinking they are one and the same. Whereas pharmaceutics is the science of preparing and dispensing drugs (otherwise known as the science of pharmacy), pharmacology is the study of medications.

For a complete list of videos, visit our video library