The main policy conclusion of the rational expectations school is
A)fiscal policy lags are so long and variable that such policy is worthless,but monetary policy can be helpful
B)monetary policy lags are so long and variable that such policy is worthless,but fiscal policy can be helpful
C)both monetary and fiscal policy can be helpful if policy makers correctly anticipate the plans of firms and households
D)both monetary and fiscal policy can be helpful if firms and households correctly anticipate the plans of policy makers
E)neither monetary nor fiscal policy can be helpful if firms and households correctly anticipate the plans of policy makers

Question

Quizplus · Accepted Answer

The rational expectations school argues that if firms and households anticipate policy actions, they will adjust their behavior in ways that neutralize the effects of those policies, rendering them ineffective.

The Main Policy Conclusion of the Rational Expectations School Is