Rational expectations theory is based on the assumption that when individuals in the economy are forming expectations, they
A) use all available information.
B) use past evidence only.
C) consistently make the same errors.
D) pay no attention to past information.

Question

Quizplus · Accepted Answer

Rational expectations theory assumes that individuals use all available information, including past data and current events, to form their expectations about future outcomes. This means that individuals are rational and make decisions based on the most up-to-date and relevant information.

Rational Expectations Theory Is Based on the Assumption That When