The primary incentive for economic agents to formulate expectations rationally is to
A) increase earnings.
B) increase prices.
C) reduce prices.
D) ensure that all expectations are realized.

Question

Quizplus · Accepted Answer

Economic agents formulate rational expectations in order to make informed decisions that will ultimately lead to increased earnings or profits. By making accurate predictions about future economic conditions, individuals and firms can better allocate resources and make wise investments, which in turn can lead to greater financial rewards.

The Primary Incentive for Economic Agents to Formulate Expectations Rationally