"Preannounced, stable policies to achieve a low and constant money supply growth and a balanced federal budget are therefore the best way to lower the inflation rate." This statement best illustrates the:
A) Keynesian theory.
B) rational expectations theory.
C) incomes policy.
D) supply-side theory.

Question

Quizplus · Accepted Answer

The statement suggests that individuals have rational expectations and adjust their behavior based on preannounced policy. This aligns with the assumptions of the rational expectations theory. The other options are not supported by the statement.

"Preannounced, Stable Policies to Achieve a Low and Constant Money