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Why Does the Rational Expectations School Advocate the Passive Rule

Question 26

Multiple Choice

Why does the rational expectations school advocate the passive rule of a fixed-growth-rate monetary policy?  


A)  because the information needed to pursue an active policy is insufficient 
B)  because the economy is NOT in bad enough shape to require active intervention 
C)  because people render active policy ineffective by figuring out what the policy is going to be and taking actions to offset it 
D)  because people prefer to put their major emphasis on an active fiscal policy

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