A Conclusion of the Theory of Rational Expectations Is That

Multiple Choice

A conclusion of the theory of rational expectations is that, in the short run, the impact of discretionary fiscal policies designed to shift the AD curve will:

A) ​result in no net change in AD once people's expectations adjustments have been accounted for.
B) ​shift AD in the opposite direction intended once people's expectations adjustments have been accounted for.
C) ​be anticipated and compensated for, causing no significant effect on real or nominal GDP or employment.
D) ​have to be a surprise to change real output in the intended direction.