The rational expectations perspective suggests that
A) ﬁscal policy is more powerful than monetary policy.
B) monetary policy is more powerful than ﬁscal policy.
C) ﬁscal and monetary policy are not likely to achieve their stated aims.
D) ﬁscal policy works only to the extent that it is accompanied by fully anticipated changes in the money supply.

Question

Quizplus · Accepted Answer

The rational expectations perspective suggests that individuals have rational expectations about future economic conditions and policymakers' actions, leading to their actions and decisions being shaped accordingly. As a result, both fiscal and monetary policies may not be able to achieve their stated aims because individuals anticipate their effects and adjust their behavior accordingly.

The Rational Expectations Perspective Suggests That