If the public has rational expectations, a. the only effective policy would be one...
If the public has rational expectations,
a. the only effective policy would be one that is implemented by surprise.
b. if the public incorrectly anticipates a given policy, there could be adverse results.
c. if policymakers do not do what they say they are going to do, then there could be adverse results.
d. a, b, and c
e. none of the above
Homework Answers
If the public has rational expectations about the present situation, it will affect the future situation for the economy.
So, If policymakers do not do what they say they are going to do, then there could be adverse results because people will form rational expectations about the policymakers and they may stop trusting them.
The correct option is C
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