Question: Why do models with rational expectations have difficulty in explaining the persistence of output from its trend and unemployment from the natural rate? What are

Why do models with rational expectations have difficulty in explaining the persistence of output from its trend and unemployment from the natural rate? What are some of the reasons given for this persistence? If this persistence were incorporated in them, what would be their implications for the effectiveness of monetary policy: could activist monetary policy stabilize output and the unemployment rate? Discuss in the context of a specific model embodying such persistence.

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