The idea that anticipated monetary policy changes cannot affect real GDP or employment is known as
A) the systematic policy hypothesis.
B) the policy irrelevance theorem.
C) the bounded rationality hypothesis.
D) the Keynesian hypothesis.

Question

Quizplus · Accepted Answer

The policy irrelevance theorem (also known as the Ricardian equivalence theorem) argues that anticipated changes in monetary policy will not have an effect on real GDP or employment because individuals will adjust their behavior in anticipation of the policy change. Therefore, the theorem suggests that changes in monetary policy may have no real impact on the economy.

The Idea That Anticipated Monetary Policy Changes Cannot Affect Real