The only difference between adaptive and rational expectations is that the theory of adaptive expectations assumes economic agents to be irrational.

Question

Quizplus · Accepted Answer

The theory of adaptive expectations does not assume economic agents to be irrational, but instead assumes that agents base their expectations on past experiences and make adjustments over time as those experiences change. Rational expectations, on the other hand, assume that economic agents have all available information and make rational predictions based on that information.

The Only Difference Between Adaptive and Rational Expectations Is That