The theory of rational expectations concludes that

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The theory of rational expectations suggests that people will form expectations about future events based on all available information, including past events and current government policies. These expectations can affect how people behave, including how they spend and save money, which can make discretionary stabilization policies less effective. Therefore, it is better to rely on policy rules, such as a target for inflation or a specific rule for adjusting interest rates, to guide monetary and fiscal policy. This helps to create greater certainty and stability in the economy.

The Theory of Rational Expectations Concludes That