Which of the following best characterizes the theory of rational expectations?
A)It describes how policymakers react to supply shocks.
B)It concerns how people use information to predict the future.
C)It explains why the long run Phillips curve is vertical.
D)It explains how people act when there is unemployment and workers must be rationed.

Question

Quizplus · Accepted Answer

The theory of rational expectations is based on the idea that people use all available information to form expectations about the future. This includes information about economic policies, market trends, and other relevant factors. The theory suggests that individuals make rational decisions based on these expectations, and that their actions can have a significant impact on the overall performance of the economy.

Which of the Following Best Characterizes the Theory of Rational