If people do NOT always make the same mistakes when forecasting the future, then
A) rational expectations are irrational.
B) the Fed can control monetary policy and determine real variables such as real GDP.
C) the policy irrelevance theorem holds.
D) fiscal policy is more effective than monetary policy at fine-tuning the economy.

Question

Quizplus · Accepted Answer

The policy irrelevance theorem states that monetary policy and fiscal policy are equivalent in their effects on the economy. This is because both policies affect the aggregate demand curve, and thus have the same effect on real GDP and the price level.

If People Do NOT Always Make the Same Mistakes When