According to rational expectations theory,people's predictions about the future course of governmental economic policy influence the position of the short-run aggregate supply curve.

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Rational expectations theory suggests that people have rational expectations about the future course of governmental economic policy and take these into consideration when making decisions about consumption, investment, and production. Therefore, their predictions affect the position of the short-run aggregate supply curve, and changes in policy will impact the economy differently depending on how they compare to these expectations.

According to Rational Expectations Theory,people's Predictions About the Future Course