The major criticism of the view that expectations are formed adaptively is that
A)this view ignores that people use more information than just past data to form their expectations.
B)it is easier to model adaptive expectations than it is to model rational expectations.
C)adaptive expectations models have no predictive power.
D)people are irrational and therefore never learn from past mistakes.

Question

Quizplus · Accepted Answer

The major criticism of adaptive expectations is that it assumes people only use past data to form their expectations, but people also incorporate other information such as news, announcements, and forecasts into their expectations. Therefore, adaptive expectations may not accurately predict future outcomes.

The Major Criticism of the View That Expectations Are Formed