Economics · Macroeconomic Schools of Thought
Which of the following statements about the Rational Expectations Hypothesis is false?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1It implies that unanticipated changes in demand have long-lasting, permanent effects on both unemployment and price level.✓
- 2It implies that anticipated changes in aggregate demand have no effect on real output or unemployment.
- 3It assumes that on average, the forecasts made by the public are correct and unbiased.
- 4It assumes that individuals utilize all available relevant information to form expectations.
Correct answer
It implies that unanticipated changes in demand have long-lasting, permanent effects on both unemployment and price level.
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