Asked by Denia Drake on Apr 28, 2024
Verified
The main policy conclusion of the rational expectations school is that:
A) fiscal policy lags are so long and variable that such policy is worthless,but monetary policy can be helpful.
B) monetary policy lags are so long and variable that such policy is worthless,but fiscal policy can be helpful.
C) both monetary and fiscal policy can be helpful if policy makers correctly anticipate the plans of firms and households.
D) both monetary and fiscal policy can be helpful if firms and households correctly anticipate the plans of policy makers.
E) neither monetary nor fiscal policy can be helpful if firms and households correctly anticipate the plans of policy makers.
Monetary Policy Lags
The delay between the implementation of monetary policy decisions and their effects on the economy, often complicating central bank efforts to control inflation and stimulate economic growth.
Fiscal Policy
Government policies related to taxation and spending that are intended to influence economic conditions.
Policy Makers
Individuals or groups responsible for making decisions and setting policies in governmental or corporate sectors.
- Comprehend the positions and outcomes as postulated by the rational expectations school in relation to monetary and fiscal policy.
Verified Answer
KA
keliza alvarezMay 03, 2024
Final Answer :
E
Explanation :
The rational expectations school posits that if firms and households can correctly anticipate the plans of policymakers, then neither monetary nor fiscal policy will be effective in influencing the economy. This is because economic agents will adjust their behavior in anticipation of these policies, neutralizing their impact.
Learning Objectives
- Comprehend the positions and outcomes as postulated by the rational expectations school in relation to monetary and fiscal policy.