IGNOU BECC 116 2025 2026 - What are the implications of policy ineffectiveness proposition?

Question

What are the implications of policy ineffectiveness proposition?

02 Mar 2026

Answer :

Word Count : 286

The policy ineffectiveness proposition, primarily associated with the rational expectations school of thought, suggests that systematic monetary and fiscal policies cannot systematically influence real variables such as output, employment, or real interest rates in the long run. This stems from the idea that economic agents form expectations rationally, using all available information, including knowledge of government policy. As a result, any anticipated policy actions are already incorporated into their

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