If people behave according to rational expectations theory, people would expect the rate of inflation this year to be:
A)the same as last year.
B)zero, regardless of the rate last year.
C)the rate based on predictable monetary and fiscal policies.
D)All of these.

Question

Quizplus · Accepted Answer

Rational expectations theory suggests that people use all available information, including predictable monetary and fiscal policies, to forecast future economic variables like inflation.

If People Behave According to Rational Expectations Theory, People Would