American economists Robert E. Hall and Michael Woodford won the Nobel Memorial Prize in economics on Monday.

The Royal Swedish Academy of Sciences announced the award in Stockholm.

The committee said their work built the theory for how consumers decide to save or spend.

This helps policymakers steady economies after ups and downs.

Hall is 83.

He works with Stanford University.

Woodford was born in 1955.

He works with Columbia University.

Both men said the award was a surprise.

Hall said he spent his career trying to understand how the economy works.

For many years, governments followed the ideas of British economist John Maynard Keynes.

These ideas came from the time of the Great Depression.

They cut interest rates and taxes.

They raised spending to restart growth.

But in the 1970s, there was high inflation and high unemployment at the same time.

This showed that plan was too simple.

Hall and Woodford made the Keynesian model better.

They studied how households and businesses really make decisions.

Hall found that consumer spending depends on what people expect to earn later.

He found that predicting this is almost impossible.

He also found that about 80% of households spent based on what they expected later.

The rest spent whatever they had.

Woodford showed that businesses set prices based on where they expect interest rates to go.

He said central banks should explain their plans clearly.

He said they should raise interest rates to stop inflation from getting out of control after supply shocks.