Rational expectations are forecasts
A)that, while not necessarily correct, are the best that can be made given the available data.
B)that are technically correct.
C)that accurately predict the short-term trade-off between inflation and unemployment.
D)made by economists using the most sophisticated econometric models.

Question

Quizplus · Accepted Answer

Rational expectations are based on the available information and knowledge of economic principles, but they may not always be correct as the future is uncertain. Rational expectations are formed by individuals and firms when they make decisions about spending, savings, and investment, and these decisions are based on their anticipations about future economic conditions. Therefore, rational expectations are the best that can be made given the available data, but they are not always accurate.

Rational Expectations Are Forecasts