Proponents of rational expectations believe that:
A) changes in AD cause business cycles.
B) people will not be surprised by systematic monetary and fiscal policies.
C) the economy will have to undergo long periods of unemployment during recessions.
D) the velocity of money does not exist.

Question

Quizplus · Accepted Answer

Proponents of rational expectations believe that people will not be surprised by systematic monetary and fiscal policies. They believe that individuals have rational expectations and will adjust their behavior accordingly, meaning that changes in policies will not have significant impacts on the economy.

Proponents of Rational Expectations Believe That