To stabilize the economy rational expectations theorists favor the use of

A) wage and price controls.
B) discretionary fiscal policy.
C) discretionary monetary policy.
D) policy rules.

Rational expectations theorists believe that individuals form expectations about future economic conditions based on all available information, and therefore they will adjust their behaviors in response to any policy changes. As a result, discretionary fiscal and monetary policies are seen as ineffective since their outcomes are already expected by individuals. Instead, policy rules that are predictable and transparent are favored to stabilize the economy. This allows individuals to make better decisions that are in line with the overall objective of the economy.