If expectations are formed rationally,then
A) activist monetary policy may yield no gains whatsoever.
B) monetary policy has real effects in the long run.
C) inflation will only hurt lenders and not borrowers.
D) inflation will only hurt borrowers and not lenders.
E) individuals expect inflation equal to their most recent experience.

Question

Quizplus · Accepted Answer

If expectations are formed rationally, individuals use all available information to predict future economic variables, such as inflation. This means that any systematic monetary policy will be anticipated and thus have no real effects on output or employment, as people adjust their behavior accordingly.

If Expectations Are Formed Rationally,then