According to the Rational Expectations Approach, an Announcement That Interest

Multiple Choice

According to the rational expectations approach, an announcement that interest rates may be raised to curb inflation would likely cause businesses and households to:

A) put political pressure on officials to cancel the planned interest rate changes.
B) go along with the policy knowing that it is in their best interest to curb inflation.
C) immediately borrow and increase their spending to beat the rise in the interest rates.
D) reduce borrowing and depend more on the expenditure of saved income and earnings.