According to the rational expectations theory,monetary policy is fully anticipated and therefore only affects:
A)the level of real GDP.
B)the level of real investment.
C)the price level.
D)the level of real consumption.
E)the level of exports.

Question

According to the rational expectations theory,monetary policy is fully anticipated and therefore only affects:
A)the level of real GDP.
B)t​he level of real investment.
C)the price level.
D)the level of real consumption.
E)the level of exports.

Quizplus · Accepted Answer

According to the rational expectations theory, individuals and firms adjust their expectations of future economic variables based on all available information, including anticipated changes in monetary policy. As a result, monetary policy only affects the price level, as individuals and firms adjust their behavior to counteract the effects of the policy on other variables such as real GDP, investment, consumption, and exports.

According to the Rational Expectations Theory,monetary Policy Is Fully Anticipated