Asked by Emaree Reeves on Apr 30, 2024
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Monetarists and the rational expectations theorists agree that
A) the Federal Reserve should adhere to a monetary rule.
B) the rate of interest and the price of bonds are positively or directly related.
C) the money supply cannot be measured and therefore cannot be controlled by the Federal Reserve.
D) fiscal policy is more effective than monetary policy.
Monetary Rule
A guideline for the monetary policy stating that the central bank should aim at regulating the money supply to maintain stable prices, output, and employment.
Rational Expectations
An economic theory proposing that individuals make decisions based on their best forecast using all available information, predicting future events with some degree of accuracy.
Federal Reserve
The central bank of the United States, responsible for monetary policy.
- Understand the principles of Milton Friedman's monetarist theories and their influence on economic policy formulation.
- Comprehend the principle of rational expectations and its consequences for the efficacy of economic policies.
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Learning Objectives
- Understand the principles of Milton Friedman's monetarist theories and their influence on economic policy formulation.
- Comprehend the principle of rational expectations and its consequences for the efficacy of economic policies.
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