Anti-inflationary policy is less costly when that policy is anticipated in ________.
A)traditional Keynesian theory
B)new Keynesian theory
C)real business cycle theory
D)institutionalist theory

Question

Quizplus · Accepted Answer

In the new Keynesian theory, agents have rational expectations and can anticipate government policies, including anti-inflationary policies. This means that the policy can be more effective and less costly because agents adjust their behaviors to account for the anticipated policy.

Anti-Inflationary Policy Is Less Costly When That Policy Is Anticipated