Studying alternative theories of how people form expectations is particularly relevant to monetary policy a. if people fully expect inflation to occur, the effects of monetary policy are more widespread. b. monetary policy can only have real effects on the economy if people fully expect inflation. c. unexpected inflation cause prices to be flexible. d. the effects of expected inflation are completely different from the effects of unexpected inflation. e. expected inflation causes prices to become sticky.

The business cycle is the periodic but irregular up-and-down movement in economic activity, measured by fluctuations in real gross domestic product (gdp) and other macroeconomic variables. a business cycle is typically characterized by four phases—recession, recovery, growth, and decline—that repeat themselves over time. economists note, however, that complete business cycles vary in length. the duration of business cycles can be anywhere from about two to twelve years, with most cycles averaging six years in length. some business analysts use the business cycle model and terminology to study and explain fluctuations in business inventory and other individual elements of corporate operations. but the term "business cycle" is still primarily associated with larger (industry-wide, regional, national, or even international) business trends.