Economists favoring the rational expectations theory maintain that

A) market participants plan counterstrategies to what the Fed is planning to do.
B) the Fed has no real short-term effect on output and employment unless it truly surprises markets.
C) market participants anticipate government policies.
D) All of the choices are correct.

Economists who support the rational expectations theory argue that market participants are forward-looking and make decisions based on their expectations of future events, including government policies and actions by the Federal Reserve. They believe that market participants will plan counterstrategies to anticipated government policies, and the Fed's actions will only have a real impact on output and employment if they surprise the markets. Therefore, all of the choices are correct.