According to the rational expectations approach, if policy makers consistently stimulate aggregate demand when real output falls below the economy's potential output, then people will not be able to anticipate the effects of this policy on the price level, unemployment, and real output level.

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According to the rational expectations approach, people are assumed to have rational expectations and ability to anticipate the effects of policies on the economy. Therefore, if policy makers consistently apply a specific policy, people will adjust their expectations accordingly and the effects of the policy will be anticipated.

According to the Rational Expectations Approach, If Policy Makers Consistently