"A consistent countercyclical policy has no effect on employment and output, since individuals will recognize those policies as systematic and will anticipate them correctly." This statement is most closely associated with _____ theory.
A) classical
B) Keynesian
C) rational expectations
D) monetarist

Question

Quizplus · Accepted Answer

This statement is consistent with the rational expectations theory, which argues that individuals form their expectations based on all available information, including past government policies. Thus, if individuals know that the government will always implement countercyclical policies during economic downturns, they will anticipate them and adjust their behavior accordingly, which may offset any intended effects on employment and output.

"A Consistent Countercyclical Policy Has No Effect on Employment and Output