According to the theory of rational expectations, if the Fed uses open market operations in order to increase the supply of loanable funds, the ultimate effect on interest rates is definitely

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Quizplus · Accepted Answer

According to the theory of rational expectations, individuals and firms anticipate the effects of policy actions like open market operations. If they expect the Fed's actions to lead to inflation, they may adjust their behavior, potentially offsetting the intended effect on interest rates. Thus, the impact on interest rates cannot be determined with certainty.

According to the Theory of Rational Expectations, If the Fed