The term 'rational expectations' means:
A) people make full use of all the information available to them in forming expectations about the future
B) market participants are able to accurately predict changes in future prices
C) market participants have perfect information
D) market participants are able to accurately predict changes in future prices and other economic variables

Question

Quizplus · Accepted Answer

Rational expectations refer to the assumption that individuals use all available information efficiently to forecast future economic variables, though not necessarily perfectly predicting them.

The Term 'Rational Expectations' Means