1. One key assumption behind the policy irrelevance proposition is that A. the rational expectations hypothesis...

1. One key assumption behind the policy irrelevance proposition is that

A. the rational expectations hypothesis holds.

B. markets are not purely competitive.

C. prices are "sticky" upward.

D. wages are "sticky" downward.

2. Initial studies of new Keynesian inflation dynamics indicated that the average price-adjustment intervals in the United States was as long as

A. 12 months.

B. 4 years.

C. 2 years.

D. 6 months.

3. Rational expectations theory suggests that short-run stabilization policy

A. is not effective in stabilizing the economy.

B. is best achieved with monetary policy.

C. is best achieved with fiscal policy.

D. is equally easy to achieve with monetary or fiscal policy.

Expert Solution

Rahul Sunny answered 2 years ago

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