The theory of rational expectations indicates that households and businesses’ expectations change and therefore the effectiveness of monetary or fiscal policy.

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25-07-2022
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The theory of rational expectations indicates that households and businesses’ expectations change and therefore the effectiveness of monetary or fiscal policy.

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ogorwyne ogorwyne · Answer 1 · 2022-08-05T17:52:37+02:00

The theory of rational expectations indicates that households and businesses’ expectations change immediately and therefore preclude the effectiveness of monetary or fiscal policy.

What is the theory of rational expectations?

This is the term that is used in Economics to refer to the fact that the individuals and the people are known to base their decisions on their experiences, available information and their ability to make rational decisions.

This theory tells us that people do not just act. They have to consider these factors first in order to make the best choice that they need. Hence the The theory of rational expectations indicates that households and businesses’ expectations change immediately and therefore preclude the effectiveness of monetary or fiscal policy.

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The theory of rational expectations indicates that households and businesses’ expectations change ________ and therefore ________ the effectiveness of monetary or fiscal policy.

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What is the theory of rational expectations?

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The theory of rational expectations indicates that households and businesses’ expectations change and therefore the effectiveness of monetary or fiscal policy.