According to the rational expectations school,when the economy is operating at the potential output level,a temporary decrease in unemployment is possible through appropriate monetary policy-but only if workers and employers are aware in advance of the Fed's intentions.

Question

Quizplus · Accepted Answer

The rational expectations school argues that monetary policy cannot systematically manipulate real variables like unemployment in the long run, even with advance notice, because people will adjust their expectations and actions accordingly, neutralizing the policy's intended effects.

According to the Rational Expectations School,when the Economy Is Operating