Are the implications of the impact of an unexpected shift to a more expansionary monetary policy different under the rational and adaptive expectations hypotheses in the short run? Yes, because under adaptive expectations, there is a significant time lag before people come to expect the inflation and incorporate it into their decision making, whereas the rational expectations theory implies that people will begin to anticipate more inflation as soon as they observe a move toward a more expansionary policy. Yes, because under rational expectations, there is a significant time lag before people come to expect the inflation and incorporate it into their decision making, whereas the adaptive expectations theory implies that people will begin to anticipate more inflation as soon as they observe a move toward a more expansionary policy. No, because under both theories, there is a significant time lag before people come to expect the inflation and incorporate it into their decision making.

Are the implications of the impact of an unexpected shift to a more expansionary monetary policy different under the rational and adaptive expectations hypotheses in the short run? Yes, because under adaptive expectations, there is a significant time lag before people come to expect the inflation and incorporate it into their decision making, whereas the rational expectations theory implies that people will begin to anticipate more inflation as soon as they observe a move toward a more expansionary policy. Yes, because under rational expectations, there is a significant time lag before people come to expect the inflation and incorporate it into their decision making, whereas the adaptive expectations theory implies that people will begin to anticipate more inflation as soon as they observe a move toward a more expansionary policy. No, because under both theories, there is a significant time lag before people come to expect the inflation and incorporate it into their decision making.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

5. Critical Analysis Q6
Are the implications of the impact of an unexpected shift to a more expansionary monetary policy different under the rational and adaptive
expectations hypotheses in the short run?
Yes, because under adaptive expectations, there is a significant time lag before people come to expect the inflation and incorporate it
into their decision making, whereas the rational expectations theory implies that people will begin to anticipate more inflation as soon as
they observe a move toward a more expansionary policy.
Yes, because under rational expectations, there is a significant time lag before people come to expect the inflation and incorporate it into
their decision making, whereas the adaptive expectations theory implies that people will begin to anticipate more inflation as soon as
they observe a move toward a more expansionary policy.
No, because under both theories, there is a significant time lag before people come to expect the inflation and incorporate it into their
decision making.
No, because under both theories, people will begin to anticipate more inflation as soon as they observe a move toward a more
expansionary policy.

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