-The policy ineffectiveness proposition ________.
A) asserts that anticipated changes in monetary policy cannot affect real aggregate output
B) does not rule out output effects from policy surprises
C) implies that an anticipated contractionary monetary policy cannot reduce the rate of inflation
D) A and B only

Question

-The policy ineffectiveness proposition ________.
A) asserts that anticipated changes in monetary policy cannot affect real aggregate output 
B) does not rule out output effects from policy surprises 
C) implies that an anticipated contractionary monetary policy cannot reduce the rate of inflation 
D) A and B only

Quizplus · Accepted Answer

The policy ineffectiveness proposition, associated with the rational expectations theory, asserts that anticipated changes in monetary policy cannot affect real aggregate output (A) but does not rule out output effects from policy surprises (B), making D the correct choice.

-The Policy Ineffectiveness Proposition ________