People have a strong incentive to form rational expectations because
A)they are guaranteed of success in the stock market.
B)it is costly not to do so.
C)it is costly to do so.
D)everyone wants to be rational.

Question

Quizplus · Accepted Answer

Forming rational expectations is important because it is costly not to do so. When people make decisions based on flawed or incorrect expectations, they can suffer financial losses, miss opportunities, or make other errors that could have been avoided with more rational thinking. Therefore, it is in their best interest to form expectations that are as accurate and reasonable as possible, even if this requires some effort or investment. A, C, and D are incorrect because they do not reflect the benefits or rationale for forming rational expectations.

People Have a Strong Incentive to Form Rational Expectations Because