According to rational expectations,
A)people never make mistakes when they forecast the future.
B)people never make systematic mistakes when they forecast the future.
C)people always overestimate the inflation rate.
D)people always underestimate the money supply effects.

Question

Quizplus · Accepted Answer

Rational expectations theory suggests that people make predictions about the future based on all available information and past experiences. Therefore, it assumes that people do not make systematic mistakes in their predictions. However, it does not assume that people are always correct in their forecasts.

According to Rational Expectations