People are said to have rational expectations if they:
A) assume that this year's inflation rate will be equal to the average inflation rate over the past 10 years.
B) use all available information in forming their expectations.
C) merely guess at the inflation rate.
D) assume that this year's inflation rate will be the same as last year's inflation rate.

Question

Quizplus · Accepted Answer

Rational expectations theory assumes that individuals use all available information in forming their expectations, not just relying on past trends or guesses.

People Are Said to Have Rational Expectations If They