Rational expectations means that workers and firms form their expectations using:
A)all the information available to them.
B)only information from the past.
C)only information provided to them by the government.
D)only information gathered from random sources.

Question

Quizplus · Accepted Answer

Rational expectations theory assumes that individuals make decisions based on all available information and data, including past experiences and predictions about future trends. Therefore, choice A, "all the information available to them," is the most accurate answer. Focusing only on the past (B) or relying solely on government-provided information (C) or random sources (D) does not align with the premise of rational expectations theory.

Rational Expectations Means That Workers and Firms Form Their Expectations