Question

According to the rational expectations view, _____. Group of answer choices people use only past information to form expectations about future inflation rates the long-run inflation rate is equal to zero the economy will never deviate from the natural rate of unemployment for any anticipated policy expected inflation is always less than actual inflation announced money-growth policies are quite effective in reducing unemployment below its natural rate

Answer 1

economy will never deviate from the natural rate of unemployment for any anticipated policy

Explanation:

For any anticipated policy the economy will never deviate from the natural rate of unemployment. According to the theory of rational expectations, people will use all resources available to build an opinion on the economic event, and respond accordingly.

Therefore response is 3 (people should correctly predict the policy outcome and adapt accordingly).