One economic theory states that people combine the effects of past policy changes on important economic variables with their own judgment about the future effects of current and future policy changes,and react accordingly.This theory is known as the

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The rational expectations hypothesis posits that people form expectations about future economic variables based on their understanding of the economy's underlying structure and policy regimes. This means that people will consider past policy changes and their current expectations about future policy changes when making economic decisions.

One Economic Theory States That People Combine the Effects of Past