The theorists of the rational expectations school _____
A) favor monetary rules because they believe individuals know too little about how the economy works.
B) favor monetary rules so that workers and firms do not get any unanticipated surprises from the Fed.
C) are those who favor an "active approach" to policy and reject monetary rules.
D) oppose monetary rules because they believe rules impede the natural self-correcting mechanism of the economy.
E) believe in implementing discretionary policies.

Question

Quizplus · Accepted Answer

The theorists of the rational expectations school believe that individuals have rational expectations about the future state of the economy, and therefore monetary policy actions should be predictable and transparent. They favor monetary rules so that workers and firms do not get any unanticipated surprises from the Fed.

The Theorists of the Rational Expectations School _____