The theory that people will expect fiscal and monetary policies to have certain effects and that they will take actions that make these policies ineffective is the

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The rational expectations theory suggests that individuals make decisions based on their rational outlook, available information, and past experiences. They anticipate the effects of fiscal and monetary policies and adjust their actions accordingly, often rendering these policies ineffective. This theory contrasts with the adaptive expectations theory, where expectations are formed solely based on past events without anticipating future policy impacts.

The Theory That People Will Expect Fiscal and Monetary Policies