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    Money & Growth

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    Evaluate the statement: "In an important sense the term policy irrelevance proposition is misleading because if the rational expectations hypothesis is valid, economic policy actions can have significant effects on real GDP & the unemployment rate"

    correct or incorrect statement?

    © BrainMass Inc. brainmass.com October 9, 2019, 8:54 pm ad1c9bdddf
    https://brainmass.com/economics/economic-growth/money-growth-166450

    Solution Preview

    This statement is untrue, but not because policy actions don't have an effect. They often do. It is untrue because it is based on a flawed understanding of rational expectations. The statement implies that people who are rational will respond to economic policy actions predictably, enabling them to work. ...

    Solution Summary

    Policy irrelevance and the rational expectations hypothesis

    $2.19