According to the rational expectations school,a correctly anticipated expansionary monetary policy will
A)increase prices and real output
B)increase real output in the short run only
C)have no effect on prices or real output
D)decrease prices and real output
E)lead only to a higher price level

Question

Quizplus · Accepted Answer

Rational expectations suggest that if an expansionary monetary policy is correctly anticipated, individuals will adjust their expectations accordingly, leading to an immediate increase in prices without affecting real output.

According to the Rational Expectations School,a Correctly Anticipated Expansionary Monetary