According to rational expectations theory, what information do businesses and workers use when they form their expectations regarding inflation?
A) recent events and data
B) Keynesian and monetarist models
C) forecasts by public-and private-sector economists
D) all the relevant information that is available

Question

Quizplus · Accepted Answer

Rational expectations theory suggests that businesses and workers form their expectations based on all the relevant information that is available. This includes recent events and data, economic models, forecasts by public and private sector economists, and any other relevant information. The theory assumes that individuals are rational and have access to all necessary information, therefore they will use all available information to make their predictions about future inflation.

According to Rational Expectations Theory, What Information Do Businesses and Workers