Economics (M.Phil./Ph.D.) 2015 Panjab University Entrance Exam With Answers

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28.

According to Rational Expectations Theory, money supply changes :

A: Generally do not affect the real rate of interest
B: Generally do affect the rate of interest
C: Affect the real rate of interest because individuals incorrectly anticipate the inflationary effect of money supply changes
D: Affect the real rate of interest because individuals correctly anticipate the inflationary effect of money supply changes

The answer is: A

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