Question

If people have rational​ expectations, A. on​ average, all markets will​ clear, and there will be...

If people have rational​ expectations,

A. on​ average, all markets will​ clear, and there will be full employment.

B. unemployment can last for a significant period of time.

C. anticipated policy changes will have a significant effect on output.

D. aggregate supply will​ increase, creating economic growth

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Answer #1

(A) Rational expectations is the theory which states that in an economy all agents are have perfect information about all predictions and anticipations and use this information to make their economic decisions. Acc. to this theory anticipated changes in policy cant change output by much because all economic agents make their decision taking into account this anticipated policy.

Thus If people have rational​ expectations, on​ average, all markets will​ clear, and there will be full employment.

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