The hypothesis that assumes that individuals form expectations about the future based on
Available information and that individuals act on that information is called the
A) random expectations theory.
B) rational information hypothesis.
C) rational expectations hypothesis.
D) adaptive expectations hypothesis.

Question

Quizplus · Accepted Answer

The description matches the rational expectations hypothesis, which posits that individuals use all available information to form expectations about future economic events and base their behavior on those expectations. The other options are not as accurate - random expectations theory suggests that expectations are formed without any real basis or logic, while the adaptive expectations hypothesis states that individuals update their expectations based on past outcomes rather than new information.

The Hypothesis That Assumes That Individuals Form Expectations About the Future