The theory according to which individuals weigh all available evidence when they formulate their expectations about economic events (including information concerning the probable effects of current and future economic policy)is called

Question

Quizplus · Accepted Answer

The theory described is known as the rational expectations hypothesis, which posits that individuals use all available information to form their expectations about economic events, including the likely effects of current and future economic policies. This theory contrasts with the adaptive expectations hypothesis, which suggests that individuals base their expectations on past experiences and may not fully take into account new information or changes in policy. The permanent income theory is focused on the relationship between current and future income, while Laffer curve analysis is a framework for examining the effects of tax policy on economic activity.

The Theory According to Which Individuals Weigh All Available Evidence