Define the concept of "rational expectations".Do rational expectations mean that individuals do not make mistakes when forming their expectations?

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Quizplus · Accepted Answer

The Answer is According to the rational expectations hypothesis,expectations are formed on the basis of all the available relevant information concerning the variable being predicted.Furthermore,individuals understand how the observed variables will affect the variable they are trying to predict. Rational expectations do not mean that people do not make mistakes; it only means that they do not make predictable mistakes in one direction or another.

Define the Concept of "Rational Expectations