The main practical difference between the rational expectations and adaptive expectations theories is the speed of adjustment in the economy.

Question

Quizplus · Accepted Answer

Rational expectations theory assumes that people have perfect foresight and can instantly adjust their expectations based on new information, leading to a more rapid adjustment in the economy. Adaptive expectations theory, on the other hand, assumes that people adjust their expectations gradually over time, leading to a slower adjustment in the economy.

The Main Practical Difference Between the Rational Expectations and Adaptive