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 the real output level.

Question

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 the real output level.
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Quizplus · Accepted Answer

According to the rational expectations approach, people's expectations about the effects of policy actions on the economy are based on their understanding of the underlying economic relationships. This means that if policy makers consistently stimulate aggregate demand when real output falls below potential output, people will anticipate the effects of this policy on the price level, unemployment, and real output. As a result, the policy may be less effective in stabilizing the economy than if people had not anticipated its effects.

According to the Rational Expectations Approach ,If Policy Makers Consistently