Rational expectations theory suggests there should be

Question

Quizplus · Accepted Answer

Rational expectations theory posits that individuals make decisions based on their rational outlook, available information, and past experiences. Therefore, it suggests that government policy, especially in the form of monetary policy, is largely ineffective because people will anticipate the actions of policymakers and adjust their behavior accordingly, leaving little room for government intervention to have its intended effect. This leads to the conclusion that there should be a very small role for government policy in the economy.

Rational Expectations Theory Suggests There Should Be