Under the rational expectations hypothesis, if wages adjust rapidly to new information about intended policy actions, the only time that changes in government policies have real effects is when

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Under the rational expectations hypothesis, if wages adjust rapidly to new information about intended policy actions, individuals will anticipate and incorporate the effects of government policies into their decision-making. Therefore, the only time that changes in government policies have real effects is when they are unanticipated, as individuals did not have time to adjust their behavior to account for the policy change.

Under the Rational Expectations Hypothesis, If Wages Adjust Rapidly to New