According to the rational expectations hypothesis,monetary policy can have an effect on real world variable (such as GDP)in the short run
A)only when the policy is anticipated.
B)only when the policy is unsystematic and unanticipated.
C)regardless of whether the policy is anticipated or unanticipated.
D)when the Bank of Canada operates as expected in either buying or selling bonds.

Question

Quizplus · Accepted Answer

The rational expectations hypothesis suggests that monetary policy can only affect real-world variables like GDP in the short run if the policy is unsystematic and unanticipated. This is because if a policy is anticipated, economic agents will adjust their behavior in advance, neutralizing the policy's effect on real variables.

According to the Rational Expectations Hypothesis,monetary Policy Can Have an Effect