Explain the rational expectations theory

Reference no: EM13177820

Which of the following statements concerning major cycles is incorrect?
a. major cycles are characterized by wide fluctuations in business activity
b. the United States has experienced ten major cycles since World War II
c. severe recessions in major cycles result in widespread unemployment
d. during major cycles, economic activity rises and falls relative to the long-term growth trend

Which of the following categories of business cycle theories includes the rational expectations theory?
a. physical
b. monetary
c. psychological
d. spending and saving

Which of the following is the most valid expression of a theory of underconsumption as a cause of business cycles?
a. capital goods production encroaches on consumer goods production
b. income equals production, but not all income is used for current purchasing power
c. people want more goods than the economy is capable of producing; therefore, they must cut their consumption expectations
d. the economy provides insufficient purchasing power to buy back the goods it produces

Reference no: EM13177820

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