If an economist of the rational expectations school were advising a policy maker

Question

If an economist of the rational expectations school were advising a policy maker, the advice most likely to be given would be:
A) Don't use discretionary policy if recognition lags are long.
B) Don't use discretionary policy if activity lags are long.
C) Don't use fiscal policy if effectiveness lags are long.
D) Don't use monetary policy if implementation lags are long.
E) Don't use discretionary policy.
11.
In the early 1960s, the discovery of the Phillips curve relationship caused economists and policy makers to think that they understood the tradeoffs between
A) aggregate supply and aggregate demand
B) excess aggregate supply and excess aggregate demand
C) inflation and unemployment
D) monetary and fiscal policy
E) rule-making and discretionary policy

Explanation / Answer

D) Don't use monetary policy if implementation lags are long. C) inflation and unemployment

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