According to the theory of rational expectations,
A)workers' experience tells them that government action to lower unemployment will not affect inflation.
B)consumers and investors generally behave so that rationally formed government attempts to stimulate aggregate demand have their desired effects.
C)policy goals can be achieved easily in the short run.
D)workers' wage demands include anticipated inflation.
E)expansionary monetary policy will lead to permanent interest rate declines.

Question

Quizplus · Accepted Answer

Rational expectations theory suggests that workers and other economic agents use all available information, including anticipated inflation, to make decisions, such as wage demands.

According to the Theory of Rational Expectations