In comparing monetarism and rational expectations theory, we find that
A)both favor policy rules and for the same reasons.
B)both favor policy rules, but for different reasons.
C)both favor discretionary policies.
D)the former favors discretionary policy, while the latter favors policy rules.

Question

Quizplus · Accepted Answer

Monetarism and rational expectations theory both advocate for policy rules, but they do so for different reasons. Monetarists believe in rules to control money supply to avoid inflation, while rational expectations theorists argue that rules help avoid the inefficiencies caused by people anticipating discretionary policy changes.

In Comparing Monetarism and Rational Expectations Theory, We Find That