Manu has received a 2% raise each year for the past 10 years. The company where he works has just experienced its most profitable year during that time, and Manu has had his most productive year yet and was the most productive worker in his section. Which of the following expectations of next year's salary would be consistent with Manu basing his expectations on rational expectations?
A) Manu expects a 4% raise.
B) Manu expects no raise.
C) Manu has no idea of what raise he expects.
D) Manu expects a 2% raise.

Question

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The Answer of Manu has received a 2% raise each year for the past 10 years. The company where he works has just experienced its most profitable year during that time, and Manu has had his most productive year yet and was the most productive worker in his section. Which of the following expectations of next year's salary would be consistent with Manu basing his expectations on rational expectations?
A) Manu expects a 4% raise.
B) Manu expects no raise.
C) Manu has no idea of what raise he expects.
D) Manu expects a 2% raise.

Manu Has Received a 2% Raise Each Year for the Past